There is a saying that money is always moving and life changes fast, and for the ones that can move money around that is a good thing. However, life does not change very fast because while people can and do adapt, it takes a little while for the institutions and people’s memory to adapt. A wonderful example is highlighted below.

In an article by Valentina Za, Tom Sims and Andreas Rinke of Reuters, the Italian bank UniCredit has taking a position in the German bank Commerzbank and wants to buy 29.9% of the bank. This would below the 30% regulatory feature which triggers a mandatory takeover under German corporate laws.

The backstory is ever since the creation of the EU and since WW II, the banks in Germany have been the powerhouse of the EU. Partly due to the economy of the EU, but the banks in Germany have been the leaders. The Italians were considered much like their economy, to be second tier. Over the years there has been many restructurings with the Italian economy and the banking system.

UniCredit CEO Andrea Orcel announced he had purchased 9% of the shares and was intending to be a friendly purchase and he may hold it or sell it. In 2005, UniCredit bought Bavarian bank HVB. UniCredit had accumulated 4.5% and bought another 4.5% in a tender offer from the state shares.

UniCredit said it would take possession of Commerzbank shares linked to derivative contacts if it secures approval from the ECB.

Commerzbank has more than 25,000 business customers, almost a 1/3 of the German foreign-trade payments and more than 42,000 staff. The state of Germany owns 12% of the shares and the finance ministry said it will not sell anymore shares for the time being.

Friedrich Merz, the Christian Democrat opposition leader said he is against the move by UniCredit.

Germany’s Verdi union opposed the increase by UniCredit as unions fear job losses as German banks have higher labor costs than their Italian peers.

UniCredit believes there is substantial value that can be unlocked within Commerzbank either stand alone or within the UniCredit orbit and that is good for Germany and stakeholders.

Linking to dividend paying stocks, there is rarely a perfect outcome except for various interest groups will react to a merger or moving of control from one company to another. In this case, the German banks represent something greater than simply being a bank to the institutions. Takeovers do happen, people do adjust, in the meantime many words will be spoken and written and then the next chapter will take place.

There are more questions than answers, till the next time – to raising questions.