UniCredit's Commerzbank bid runs through swaps

Andrea Orcel has not bought half of Commerzbank in the ordinary sense. What the UniCredit chief executive has built is economic exposure to 50.76% of Germany's second-largest private bank, assembled through a layered derivatives structure (ad-hoc-news.de).

The legal position is narrower. Under Germany's WpÜG, the law governing takeover bids, only positions that carry actual voting rights count towards the 30% control threshold. Cash-settled derivatives, contracts that pay out the price difference in cash rather than handing over shares, do not count (BaFin). UniCredit's voting stake is 34.4%.

That gap between economic power and legal control is now the centre of the fight. It has turned a bank takeover into a test of whether European banking can consolidate across borders, or whether national politics still decides where the walls go up.

The Hedge That Votes

On June 2nd, UniCredit said 7.58% of Commerzbank shares had been tendered in support of its offer. Commerzbank looked at the same number and saw something quite different.

Independent retail investors accounted for 0.05% of the tendered shares. No institutional investors tendered at all. Most of the shares came from banks holding Commerzbank stock as part of swap contracts with UniCredit: Nomura, with 2.06%, along with Citigroup and BNP Paribas (Deutsche Börse, Manager Magazin).

The mechanism matters. When UniCredit buys a total return swap, a derivative giving it the gains and losses on a share without owning it, the counterparty will usually buy the underlying shares to hedge its own risk. So Nomura, for example, may hold Commerzbank shares on its own books while UniCredit carries the economic exposure.

Those shares formally belong to Nomura. Financially, however, Nomura has every incentive to tender them, because UniCredit can take the exposure when the derivative settles. Commerzbank says genuine independent support is closer to 1.1% (Commerzbank).

Commerzbank filed a formal complaint with BaFin, Germany's financial regulator, on June 3rd, saying UniCredit's disclosures were "potentially misleading" (goldesel.de). BaFin had already banned UniCredit's "inflammatory" social media advertisements in April (PWC Legal).

UniCredit's answer was terse: "We do not comment on insinuations that lack factual basis."

Why BaFin Can't Stop the Deal

BaFin can police disclosure. It cannot stop the acquisition itself. Under EU banking law, the decisive prudential gate sits with the European Central Bank, which directly supervises major eurozone banks. The ECB has already authorised UniCredit to go above 29.9% of Commerzbank (Commerzbank FAQ).

ECB vice-president Luis de Guindos put the political tension plainly in May: "It's very difficult for governments to argue that they are in favour of the savings and investments union if they then say: 'Well, no, we are against this specific transaction'" (ECB, Il Sole 24 Ore).

EU law sets out five grounds for blocking a bank acquisition: the reputation of the buyer, its financial soundness, the quality of its management, the effect on supervision, and money-laundering risk. "National economic interest" is absent from that list (EBA).

Berlin's opposition is not abstract. Commerzbank estimates 10,000-11,000 jobs could go under UniCredit control. Works council representatives fear the figure could reach 23,000 (Tagesschau, Onvista).

Commerzbank chief executive Bettina Orlopp is trying to show that the bank is worth more on its own. She has promised to almost double net profit to €5.9 billion by 2030 and cut 3,000 jobs independently (Tagesschau).

For the German government, the jobs are the political case. For the ECB, they are precisely the kind of national concern that EU law says cannot override a prudential assessment.

What Happens on July 3

The tender deadline expires on July 3rd. UniCredit does not need 50% to change the balance of power. At 34.4%, it already has a blocking minority, enough to veto major corporate changes, and it can continue buying shares in the open market.

The wider argument is now moving beyond Frankfurt, Milan and Berlin. France, Italy and Spain submitted a joint proposal to the European Commission on June 3rd for a new regime to reduce barriers to cross-border banking (Euronews).

Europe's banking union still lacks its third pillar: a common deposit guarantee, stalled since 2015 (Bruegel). Without it, national governments can keep saying they are protecting depositors from foreign risk.

BaFin's ruling on the disclosure complaint, and the number of genuine independent shareholders who tender by July 3rd, will decide whether Orcel's derivative structure becomes a model for cross-border banking deals. It may also become the warning case: a deal in which financial engineering moved faster than the rules built to contain it.