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Veteran dealmaker Orcel has ambitions for cross-border

tie-up

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Commerzbank's incoming CEO, workers oppose deal with

UniCredit

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Orcel has driven sharp rise in profits, shares at

UniCredit

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Orcel "disciplined" and could still walk away, he says

By Valentina Za and Stefania Spezzati

MILAN/LONDON, Sept 27 (Reuters) - Upon taking the top

job at Italian bank UniCredit in 2021, Andrea Orcel, a

veteran M&A adviser, vowed not to repeat the mistake he saw many

CEOs make: cave in to pressure to do deals.

The chance to pursue a rare cross-border European banking

marriage, a combination deemed near-impossible by friends and

foes alike, was the moment to go all in.

Orcel riled the German establishment this month by stealthily

buying a chunk of Commerzbank and pressing for a

tie-up with Germany's second-biggest publicly-traded bank.

A merger would create a new big pan-European bank that

regulators have long encouraged to better compete with Wall

Street giants, but politicians have often resisted.

"It's shrewd, it's bold, and he's determined. He doesn't

take no for an answer," said Filippo Alloatti, head of

financials credit at fund manager Federated Hermes ( FHI ), who is an

investor in both UniCredit and Commerzbank.

In preparation for a deal, Orcel has overseen a more than

four-fold increase in UniCredit's share price. UniCredit is

significantly more profitable than the German rival it has long

coveted, despite being hobbled by the higher debt costs Italy

attracts.

"There remained a big strategic question: What is

UniCredit's future going to be?" Alloatti said. "Now we have an

answer."

Orcel's plan has been slammed by German Chancellor Olaf

Scholz as an "unfriendly attack" along with the bank's board

members and employees who fear losing their jobs.

Clinching a cross-border European merger big enough to

redraw the map would offer him a second shot to show big,

complex banking deals can work.

He was a key architect of the Royal Bank of Scotland's

acquisition and breakup of Dutch ABN Amro, one of the most

disastrous deals in banking history that ended in the collapse

of both lenders in the global financial crisis.

Orcel has yet to hire an external adviser as formal merger talks

with Commerzbank are not underway, a person with knowledge of

the bank's strategy said. The 21% of Commerzbank that UniCredit

has gained exposure to with shares and derivatives for now is

just a financial investment, Orcel told a banking conference

this week.

The 61-year old has said he will walk away from a potential

deal if he cannot have it his way: "Do not underestimate how

disciplined we are," he told the event.

Yet his early moves signal a desire to forge ahead.

A source close to the bank said the backlash that followed

the unveiling of UniCredit's initial 9% stake in Commerzbank on

Sept. 11 prompted a change in tactics.

After Germany's government signalled it wouldn't sell any

more of its Commerzbank shares, UniCredit built a bigger stake

with derivatives. The European Central Bank, as the chief

regulator, needs to sign off on investors owning more than 10%

of a bank's stock.

UniCredit declined to comment for this article.

ROUTE TO THE TOP

Orcel's current and former colleagues describe a restless and

demanding style, in part behind a high turnover of top managers

and division heads at UniCredit, a sharp contrast with the

steady senior leadership of its bigger cross-town rival, Intesa

Sanpaolo.

While head of UBS' investment bank he grew impatient as he

sought to become a CEO. He left in 2018 to take up an offer to

become Santander's chief executive but the Spanish bank

withdrew its proposal in a disagreement over pay. Orcel sought

damages and was awarded millions after a public court battle.

UniCredit insiders say Orcel is fiercely private about his

decision-making and intelligence he gathers, a habit formed as

an investment banker when he wouldn't even tell his employer

what he had discussed with clients, according to one.

When he first arrived at UniCredit, one director told

Reuters of being surprised that he would not hand out hard

copies of presentations at meetings but only project slides from

his computer to protect confidentiality.

Unlike some peers, he says, he does not court political

ties. At an event in Rome last week, Orcel lined up to greet

Italian Prime Minister Giorgia Meloni but turned about when

faced with a queue, a Reuters eyewitness said.

He has repeatedly shown he won't shy away from upsetting or

challenging those in power.

He angered Rome when, in 2021, at the last minute he abandoned a

deal to buy troubled state-owned Monte dei Paschi. More

recently, UniCredit challenged the ECB over the regulator's

request that the bank reduce its business in Russia.

In his latest battle, Commerzbank's incoming CEO Bettina

Orlopp has pledged to keep the bank independent and trade unions

to fight any takeover. A German election in 2025 may stiffen

opposition even if the government, which still owns 12% of

Commerzbank, has no obvious means of blocking Orcel.

One person who has known Orcel for years and has worked for

him said he had "backed himself into a corner" in pursuing a

deal with Commerzbank amid so much opposition but he has a keen

sense of creating a legacy.

"This transaction would really be the most important

cross-border M&A that we've seen in Europe," said Luca

Evangelisti, investment manager and head of credit research at

Jupiter Asset Management.