ING, UniCredit Tap Advisers to Explore Commerzbank

(Bloomberg) -- ING Groep NV and UniCredit SpA are lining up advisers to explore a potential takeover of Commerzbank AG after the German lender’s talks with Deutsche Bank AG broke down last month, according to people familiar with the matter.

The Dutch bank is working informally with boutique investment bank Perella Weinberg Partners, while the Italian lender is working with JPMorgan Chase & Co, the people said, asking not to be identified because talks are private. UniCredit also has a long-standing relationship with Lazard Ltd. and Joerg Asmussen, a former deputy German finance minister at the firm, they said.

ING and its rival have held on-and-off again talks with Commerzbank, though no formal negotiations are ongoing, the people said, adding that the process could take months. Representatives for ING, Perella, Lazard, and the German bank declined to comment. UniCredit, in a statement after the market close in Milan, said that it hasn’t signed any banking mandate “related to any potential rumored market operation.”

European lenders are exploring the prospects for a Commerzbank takeover after the failure of talks on a combination with Deutsche Bank made it a target for stronger rivals. While UniCredit and ING already have significant German businesses, acquiring the lender would broaden their access to Mittelstand clients -- the small and medium-sized companies that form the backbone of Germany’s economy.

Downplay Interest

UniCredit Chief Executive Officer Jean Pierre Mustier has sought to downplay any interest in Commerzbank in recent days, saying in a Bloomberg Television interview on Monday that there are too many hurdles to European banking consolidation. At the same time, the bank has cleaned up its balance sheet and pledged to bring down its holdings of Italian sovereign debt, reducing risk and making itself more attractive as a potential acquirer.

Reuters was first to report UniCredit’s advisors. The bank, in its statement, said that it was requested by Italian market authorities to comment on the report, adding that it is fully focused on the successful finish of its 2019 strategic plan “based on organic assumptions.”

The bank may still need to overcome local opposition. Commerzbank labor representatives are strongly against a potential takeover by an Italian bank, a supervisory board member of the German lender said on Monday, without naming UniCredit. “A lot of blood will spill before we merge with the Italians,” Stefan Wittmann, a Verdi union official and labor representative on the lender’s board, said during a panel discussion in Berlin.

ING’s German subsidiary has grown strongly over the past few years and had 145 billion euros worth of assets on the balance sheet at the end of 2018 - the highest figure for ING outside its home market and equivalent to almost one third of Commerzbank’s total assets.

The bank -- whose CEO has been buffeted by a money laundering scandal and disputes over his pay -- recently held its investor day in Frankfurt, further highlighting the country’s importance for the bank. It offered to relocate its headquarters to the German city from Amsterdam and pledged to cut fewer jobs than the Commerzbank-Deutsche Bank deal would have required, according to Manager Magazin.

Overcoming potential resistance from Germany to a Commerzbank takeover by a foreign bank could be another obstacle for any interested lender. The German government owns about 15.5% in Commerzbank, making it the lender’s biggest shareholder by far. ING has already reached out to the government, people familiar with the matter have said.

Germany needs “locally-based” banks, Finance Minister Olaf Scholz said recently, in some of his first public comments after the talks between Deutsche Bank and Commerzbank fell apart. The Finance Ministry was a strong proponent of that tie-up, people familiar have said.

UniCredit is currently increasing the degree of self-funding among its local subsidiaries including the German one, it said in November. Such a move is likely to address concerns potentially raised by national regulators about funding of those subsidiaries in a crisis.

--With assistance from Ruben Munsterman and Birgit Jennen.

To contact the reporters on this story: Steven Arons in Frankfurt at sarons@bloomberg.net;Eyk Henning in Frankfurt at ehenning1@bloomberg.net;Jan-Henrik Förster in Zurich at jforster20@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Christian Baumgaertel

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