UniCredit Considers Cash Sweetener in Revised Commerzbank Bid

UniCredit is preparing a new offer for Commerzbank with a substantial cash component after its all-stock proposal was rejected, aiming to win over shareholders and the German government.

The battle for control of Frankfurt-based Commerzbank is intensifying. Following a swift rejection of its initial all-stock proposal, Italy's UniCredit is reportedly preparing a revised offer that includes a substantial cash component. This strategic shift aims to overcome resistance from both Commerzbank's leadership and its shareholders.

Commerzbank CEO Bettina Orlopp dismissed the March 16th proposal, which was structured as a pure share swap, arguing it failed to deliver an adequate premium to investors. Market sentiment has reflected this skepticism, with Commerzbank shares declining 6.71 percent over the past week to close at €30.17 on Friday. To win over stakeholders and address concerns from the German government under Chancellor Friedrich Merz, UniCredit's management is now evaluating more attractive terms.

A Strategic Pivot Toward Cash

According to a report from the Italian daily Il Messaggero, UniCredit is weighing three specific models to enhance the appeal of its takeover attempt. This move away from a pure stock-for-stock exchange marks a significant change in strategy for the Milan-based bank.

The primary options under consideration are:

• Revised Hybrid Offer: Increasing the exchange ratio to between 0.50 and 0.52 UniCredit shares per Commerzbank share, supplemented by a cash payment representing 20 to 30 percent of the deal's value.
• Substantial Cash Offer: A bid featuring a massive cash component of 40 to 50 percent, which could imply a premium of up to 20 percent above Commerzbank's current market valuation.
• Shareholder Choice Model: Providing Commerzbank investors with an option that guarantees a minimum premium of 15 percent.

The original share-swap structure was largely designed to protect UniCredit's capital ratios. Incorporating a significant cash payment shifts risk but offers Commerzbank shareholders greater transaction certainty and insulation from future volatility in UniCredit's stock price.

Next Steps and Mounting Pressure

The coming days will reveal whether UniCredit formalizes these speculated improvements into an official bid. A confirmed cash component would significantly increase pressure on Commerzbank's management to engage in concrete merger negotiations.

Furthermore, UniCredit faces its own critical deadline. By May, it requires shareholder approval at an extraordinary general meeting to greenlight the capital increase necessary to fund any acquisition. The revised offer structure is seen as crucial not only for convincing Commerzbank but also for securing the backing of UniCredit's own investors.