(Bloomberg) — German Finance Minister Lars Klingbeil gave a cautiously positive comment following his meeting with UniCredit SpA Chief Executive Officer Andrea Orcel in which he laid out demands he wants the Italian lender to respect once it takes control of Commerzbank AG.
“In a constructive conversation with Mr. Orcel, I made it clear that further negotiations must be conducted responsibly,” Klingbeil said in an emailed statement after Monday’s meeting. “It is vital that Commerzbank can continue to play its important role in financing the German economy and German SMEs.”
“We keep the interests of Commerzbank’s more than 40,000 employees in mind and support them in these uncertain times,” Klingbeil also said. “We expect Commerzbank to remain a public company headquartered in Frankfurt and continue its active business with small and medium-sized companies – both in Germany and abroad.”
The conversation marked the first time the government, which owns about 13% of Commerzbank, has outlined the conditions it expects Orcel to meet for a takeover of Germany’s second-largest listed lender. The Italian had publicly pushed for an agreement for two years, despite earlier fierce resistance from his rival and politicians. Negotiations gained momentum after UniCredit acquired just under 50% of Commerzbank’s shares in a formal offer this summer.
“The two banks are now at different stages of negotiations on the deal,” Treasury spokesman Maximilian Kall said earlier on Monday. “This is no longer about a hostile takeover, but about finding the best path for the two banks.”
Given the size of the merged bank’s German business, Berlin also believes some representation of Commerzbank in UniCredit is necessary, people familiar with the matter said, asking not to be identified discussing private information. The government itself wants to keep its two seats on the supervisory board of Commerzbank while they invest in it. At this stage, they are not yet ready to discuss the sale of their 13% stake in UniCredit, they added.
Berlin previously rejected UniCredit’s takeover bid, which was seen as too low in July. The Italian bank offered 0.485 of its shares for each Commerzbank share, and this offer actually did not include any premium. A full takeover would be the bank’s biggest acquisition in nearly two decades, given Commerzbank’s market value of about 46 billion euros ($53 billion).
Orcel presented Commerzbank’s strategic plan, which includes downsizing its extensive network of offices around the world. Commerzbank CEO Bettina Orlopp is categorically against this idea. The two executives held their first formal talks last month on how to manage the expected change of control, Bloomberg News reported.
While those talks are expected to continue in the coming weeks and months, the meeting showed that reaching an agreement will not be easy, with UniCredit executives stressing that they remain committed to their previous strategic proposals while their counterparts at the German lender continue to defend their own strategy, people familiar with the matter said at the time.
UniCredit said it expects to take full ownership of its stake as early as the fourth quarter, pending regulatory approval, and then take control of Commerzbank. It puts forward the idea of replacing senior management if necessary. Given that not all shareholders typically vote at shareholder meetings, ownership of around 50% is likely to be sufficient to address strategic and governance issues.
“The German government will continue to act in the interests of the German Mittelstand, Frankfurt as a financial center and the employees of Commerzbank,” Klingbeil said in a statement on Monday.
(Updates with Treasury Secretary’s statement, starting in first paragraph.)
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