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FINANCIALS: Eurobank M&A Highly Politicised But Avoid Shorts In Targets

FINANCIALS
BulletCredit Bullets

A tale of two M&A stories yesterday, one immediately becomes highly politicised and the other is denied. There’s lots of talk but little real action yet but we’d remain cautious being underweight any of the target issuers (CMZB, smaller Italians, Spanish, UK building societies, maybe even GLEFP).

  • Unicredit (UCGIM: Baa3/BBB-/BBB-) has bought 9% of Commerzbank (CMZB: Baa2 pos/BBB) and is applying to go above the 9.9% shareholding limit. UCG already owns HVB in Germany so there’s industrial logic to a full takeover and its CEO (Andrea Orcel) has been vocal in his keenness for deals.
  • CMZB spreads were 1bp tighter than the €IG banks move (equity +16.5%). German unions immediately weighed in to attempt to block, this morning Les Echos is reporting those unions indicating CMZB should “talk to a French bank”. This move would have little industrial logic, but the limited overlap would protect German jobs. This highlights the politicised nature of large-scale banking M&A, even in-market.
  • Separately, Scor (SCOR: A-/BBB+) and Covea both appeared to deny reports they’re talking about a French insurance tie-up. 
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A tale of two M&A stories yesterday, one immediately becomes highly politicised and the other is denied. There’s lots of talk but little real action yet but we’d remain cautious being underweight any of the target issuers (CMZB, smaller Italians, Spanish, UK building societies, maybe even GLEFP).

  • Unicredit (UCGIM: Baa3/BBB-/BBB-) has bought 9% of Commerzbank (CMZB: Baa2 pos/BBB) and is applying to go above the 9.9% shareholding limit. UCG already owns HVB in Germany so there’s industrial logic to a full takeover and its CEO (Andrea Orcel) has been vocal in his keenness for deals.
  • CMZB spreads were 1bp tighter than the €IG banks move (equity +16.5%). German unions immediately weighed in to attempt to block, this morning Les Echos is reporting those unions indicating CMZB should “talk to a French bank”. This move would have little industrial logic, but the limited overlap would protect German jobs. This highlights the politicised nature of large-scale banking M&A, even in-market.
  • Separately, Scor (SCOR: A-/BBB+) and Covea both appeared to deny reports they’re talking about a French insurance tie-up.