For two years, UniCredit's chief executive, Andrea Orcel, has been circling Germany's Commerzbank. Now the two banks are finally talking about what happens next.
Neither bank would comment on the call. People familiar with the talks, who asked not to be named, say more meetings are planned in the months ahead.
Orcel started his pursuit of Commerzbank two years ago.
In March, he made a formal takeover offer.
The offer was priced close to Commerzbank's going share price, and only about 18% of shareholders accepted it.
That was still enough to lift UniCredit's stake to almost 50%, which likely means a voting majority at shareholder meetings.
The German government owns almost 13% of Commerzbank and stands behind the lender. It wants to protect Commerzbank's role in financing the German economy, and so far it has refused Orcel's requests for direct negotiations.
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Orlopp fought the takeover at first. Now she accepts that UniCredit will soon have serious influence, and she has focused on protecting what she sees as Commerzbank's core business.
Orcel wants a leaner, more profitable Commerzbank. His plan includes deep cost cuts, with up to 7,000 jobs at risk in global trade finance, back-office operations, and senior management, and it would narrow the bank's focus to its home market and Poland. He has also suggested replacing Commerzbank's top leaders.
Orlopp opposes the parts of that plan that would break up Commerzbank's international network. She is more open to UniCredit's ideas about retail banking and the back office.
The two also disagree about what a stake of just under 50% really means. Orcel argues it gives him the power to push through major changes, while Orlopp rejects that view.
In plain English, the ECB would be saying UniCredit is the real decision-maker even though it does not own the whole bank.
That ruling would put Commerzbank's assets on UniCredit's books. It would also lower UniCredit's regulatory capital, the cushion a bank keeps to absorb losses.
For investors, a thinner cushion can change how much cash a bank has left to return to shareholders. Orcel is betting that deep cost cuts will make Commerzbank profitable enough to make up the difference.
UniCredit plans to keep Commerzbank as a standalone business for at least two years after it gains control. Later, the two could be combined under HVB, UniCredit's German unit led by Marion Hoellinger.
The job numbers show the size of what Orcel is taking on:
For most investors, this is not a story about one quarter's earnings. It is about who ends up running one of Germany's biggest banks and whether leaner means better.
The ECB's ruling will decide how that plays out. If you own European bank stocks, it could move your holdings.
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