(Bloomberg) — UniCredit SpA spoke with German officials about building a stake in Commerzbank AG before Berlin began selling its shares in the firm earlier this month, adding to the confusion around Germany’s position that it was unaware the move would be coming.
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Officials from UniCredit flagged their interest after Germany announced on Sept. 3 that it would conduct a share sale and before the execution on Sept. 10, according to people familiar with the outreach.
Those talks didn’t happen at the top level of the German government, some of the people said, who asked not to be named discussing the private information.
A UniCredit spokesperson declined to comment. A spokesperson from the Italian foreign ministry declined to comment.
An official from Germany’s finance ministry said UniCredit, along with other investors, expressed interest in the sale on Sept. 4, and they were referred to the finance agency. There were no more announcements from the Italian firm about bids and further plans related to Commerzbank, nor were existing shareholdings or derivative instruments disclosed, said the official.
The nature of how UniCredit rapidly acquired a major stake in Commerzbank has become a tense political topic, threatening to disrupt relations between Berlin and Rome. While Germany says it was caught off guard and has criticized the way UniCredit purchased the shares, the Italian government and the bank’s chief executive officer, Andrea Orcel, defended the move, with the CEO on Wednesday calling it a “test case for Europe.”
Orcel used the government sale to buy a 4.5% stake in Commerzbank and add it to a similar-sized holding he had built up quietly beforehand, partly through derivatives. He later expanded his economic ownership to about 21% by purchasing more financial instruments, effectively making UniCredit the largest shareholder ahead of Germany.
Berlin has said it was surprised by the move. German Chancellor Olaf Scholz, who has come under fire from opposition parties over the situation, has labeled UniCredit’s actions “unfriendly.” The government has also said it’s suspending further Commerzbank share sales, with Finance Ministry Christian Lindner explicitly linking that decision to the “style” of the Italian bank’s approach.
Orcel has said that the German government was aware of his intentions with respect to Commerzbank and it shouldn’t have been surprised when UniCredit submitted a bid for the country’s stake in the lender. He also said on Wednesday that there were contacts between UniCredit and “stakeholders” ahead of that sale.
UniCredit’s communications with the German government earlier this month came on top of feelers extended over the last year when representatives from the lender — including Orcel himself — expressed interest in Commerzbank, said the people. Some of those meetings were between Orcel and German government officials from the chancellery and the finance ministry, and facilitated by the Italian embassy in Berlin, said the people.
The German government saw those contacts as broad overtures and was surprised when UniCredit purchased the stake, the people said. Berlin was unaware that Orcel had already built up a holding in Commerzbank in the weeks preceding its sale and aimed the placement at financial investors who would each buy small portions.
The morning of the sale, the investment bank handling the sale JPMorgan Chase & Co. sounded out possible investors — including UniCredit as the sole strategic investor — because it had been flagged by the German side that the Italian lender had previously flagged its interest, one of the people said. JPMorgan also informed the German side on Sept. 10 that UniCredit had built a stake before the formal start of the sale process, one of the people said.
The government bodies overseeing the Commerzbank stake and its sale — the German finance ministry and the finance agency — were reluctant to engage with potential investors once they had announced the sales plan, the people said. Instead, they referred interested parties to JPMorgan as they were concerned any contacts could be seen as favoring some investors over others, which would breach European Union rules.
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