Germany formally rejects UniCredit offer for Commerzbank

Germany has officially rejected UniCredit's offer for Commerzbank shares, the country's financial agency said on Tuesday (16), citing the low price and concerns about what it called the Italian bank's aggressive approach.

The initial deadline for UniCredit's bid for Commerzbank shares is coming to an end, with both banks remaining adamant in this months-long battle for control of one of Germany's most important financial institutions.

The German government holds a 12% stake in Commerzbank, acquired in the wake of the 2008 global financial crisis, and has long opposed UniCredit's campaign for a merger.

"Accepting the offer was no longer an option from a financial point of view, as it does not include an adequate premium over Commerzbank's current share price," the agency said.

Despite Berlin's position, UniCredit could still gain control of the German bank, but the government's stake guarantees it seats on Commerzbank's supervisory board, which appoints management and helps oversee its strategy.

The agency, which manages government holdings, also said it supported Commerzbank's independence and noted that the bank plays a key role in financing medium-sized companies (Mittelstand) and is a key player in Frankfurt, the country's financial center.

"Both must continue to be guaranteed in the future", he stated.

Separately, Frankfurt prosecutors confirmed on Tuesday that they had opened a preliminary investigation into possible market manipulation related to the offer, without providing details.

This follows a criminal complaint filed by the Commerzbank works council, which reached the Public Prosecutor's Office on Sunday (14).

Be8 presents new biofuel at fair in Germany | MONEY NEWS

The group of employees had informed the team that they would file the complaint against unidentified people amid questions about UniCredit's acquisition of Commerzbank shares at a price below market value.

UniCredit said in a statement that it was aware of the matter and that the Public Prosecutor's Office's response was "in accordance with protocol when such complaints are filed".

In Tuesday's trading, Commerzbank shares fell below the price implied by UniCredit's takeover offer, after having consistently traded above that level since the launch of the offer, making UniCredit's proposal relatively unattractive.

Commerzbank's shares were trading at 36.53 euros, while UniCredit's were at 76.97 euros.

With an exchange ratio of 0.485 new UniCredit shares for each Commerzbank share offered, the Italian bank's offer values Commerzbank at 37.33 euros per share.

The offer ends on Tuesday, but will be extended for another 15 days from June 20th.

Source: CNN