FRANKFURT/LONDON, Sept 11 (Reuters) - It was late on

Tuesday evening in Europe and investors' suspicions were

growing. The German government's efforts to sell Commerzbank

shares in a market placement, on the face of it, a

simple task, were stalling.

They had expected the deal to wrap up soon after JPMorgan ( JPM )

and Goldman Sachs ( GS ) started taking orders earlier

that afternoon, according to a source familiar with the

transaction and emailed updates the banks sent to investors,

seen by Reuters. Sources requested anonymity because the sale

details were private.

But it wasn't until the early hours of Wednesday that the

news landed.

In a surprise -- and rare move -- all the shares, worth

about 700 million euros ($771.3 million), had gone to one buyer,

and Goldman was no longer involved in the sale.

Italy's UniCredit, led by CEO Andrea Orcel, had

scooped up the whole 4.5% stake by outbidding others.

What's more, the lender had also quietly purchased another

4.5% on the open market, making UniCredit one of the biggest

shareholders and opening the door to a potential deal with

Commerzbank, which had rushed in Goldman as defence adviser.

Some German government officials said they were blindsided

by Orcel's move. But there has been long-standing chatter about

the Italian bank, which is flush with excess capital and already

owns German lender HVB, being keen for Commerzbank if it had the

right opportunity. And European regulators have long favoured

consolidation in a sector plagued by low profitability.

The announcement by Berlin last week that it wanted to sell

some of its 16% crisis-era holding in Commerzbank appears to

have given Orcel, the consummate M&A banker that chance.

"It's unlikely UniCredit stumbled into this in the way it's

being painted in the market, it's likely to be a lot better

coordinated than at first glance and there is likely to be a

complex underlying long-term strategy at play," said Mark Kelly,

CEO of MKP Advisors.

UniCredit declined to comment for this article. Officials

for JPMorgan ( JPM ) and Goldman Sachs ( GS ) declined to comment on their role

in the transaction.

UniCredit paid a 4.8% premium to the closing price on

Tuesday, spending about 700 million euros on the government

stake, according to a term sheet.

JPMorgan ( JPM ) was obliged to accept the best offer in the

interest of a fair and transparent process, another person said,

who was not authorised to speak publicly.

Meanwhile the other bookrunner on the sale, Goldman, had to

step away from the transaction because of the potential

conflict, a third person added. It was now leading the defence

for Commerzbank.

As the news broke on Wednesday, Orcel approached Commerzbank

management with a view to explore potential talks about a

merger, another source with knowledge of the situation told

Reuters.

UniCredit has said it is seeking approval to buy more than

9.9% of Commerzbank should it want to.

"From here, the ball is very much in UniCredit's court,

and all eyes will be on whether it proceeds with increasing its

stake in Commerzbank above 9.9%," said Filippo Alloatti, Head of

Financials (Credit) at Federated Hermes.

Other European banks may also be considering their strategic

options, including Deutsche Bank, which declined to comment on

Wednesday.

Commerzbank has wasted little time. It hastily convened

a board meeting on Wednesday during which it discussed how to

keep the German lender independent, exploring defence strategies

to resist a potential bid from UniCredit, a source said, asking

to remain anonymous because the discussions were private.

Germany is likely to hit pause on any further share sales

after being taken off-guard, a government source said, adding

that the bank and the government needed to assess what is now a

new situation. Trade unionists too, fearing heavy job losses,

also oppose a tie-up.

Commerzbank shares closed up 16.6% at 14.69 euros in

Frankfurt, while UniCredit's closed 0.2% higher in Milan.

($1 = 0.9075 euros)

(Writing by Anousha Sakoui

Editing by Tommy Reggiori Wilkes, Elisa Martinuzzi and Anna

Driver)