The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Liam Proud

LONDON, July 23 (Reuters Breakingviews) - Andrea Orcel, a supposed master of deal tactics, has achieved very little from a blizzard of merger activity he whipped up last year. UniCredit CRDI.MI, the 94-billion-euro bank he runs, on Tuesday dropped its offer for 15-billion-euro Italian rival Banco BPM BAMI.MI. It also now seems set on keeping a near-30% stake in 33-billion-euro Commerzbank CBKG.DE, despite German hostility. Investors will have lingering questions over the saga – and may soon push him for a less fuzzy outcome.

Admittedly, Orcel’s quest for consolidation has largely been sunk by political hostility in Rome and Berlin, which is arguably out of his hands. When withdrawing the BPM deal, UniCredit cited the Italian government’s so-called golden power conditions, which included a quick and potentially costly shrinkage of the bank’s Russian unit. Meanwhile new German Chancellor Friedrich Merz has effectively told Orcel, who in an ideal world would like to buy Commerzbank outright, to get lost. Both governments’ stances look like an overreach and run counter to the bloc’s wider push for greater corporate and financial heft.

It’s also probably true, however, that UniCredit’s aggressive tactics made resistance more likely. Orcel kept increasing his Commerz holding even after the initial stake purchase prompted an outcry, fuelling the narrative of a hostile foreign raid. The initial BPM offer, meanwhile, came with a risible 0.5% equity premium, which arguably meant the target’s board faced relatively little pressure from its own shareholders to engage in deal talks. In a parallel universe, Orcel might have launched a conventional, fair-priced bid for one or both of his targets and ended up with a higher chance of success.

In any case, investors will now have two key questions. First: is an Italian deal out of the question for UniCredit? It’s possible that local courts or Brussels will help by slapping down Rome’s golden powers, in theory allowing UniCredit to move again for BPM one day. The main impediment there would be France’s Crédit Agricole CAGR.PA, which seems to be on its way to holding more than a fifth of BPM’s shares – a possible blocking minority. There are other assets on the market, potentially including 5-billion-euro Banca Generali BGN.MI, but they’re all either involved in another deal or too small to make much difference.

The second question is whether it makes sense to indefinitely hold almost a third of Commerzbank, a stake worth 10 billion euros at current market prices, even though the chances of a deal seem low given Berlin’s opposition. The next German federal election isn’t due until March 2029, suggesting a long wait. And Commerz’s valuation has crept closer to UniCredit’s own multiple, with the German bank now hitting 1.1 times its estimated 12-month forward tangible book value. JPMorgan analysts estimate a modest return of between 12% and 13% for UniCredit from buying the German lender at today’s levels.

The longer the status quo persists, then, the more likely it is that investors will push Orcel to sell out at what looks like a full price for a middling German lender. That would bring some clarity to the lingering M&A mist – if not to the question of whether the UniCredit boss's tactics were valid in the first place.

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CONTEXT NEWS

UniCredit said on July 22 that it would withdraw its offer for Banco BPM because of the conditions laid down by the Italian government. The timeline for resolving the so-called golden power requirements, the bank said, would stretch beyond the end of the offer period.

The bank on July 23 said it generated 2.9 billion euros of earnings in the second quarter of 2025, after excluding one-offs like the effects of revaluation of its life-insurance stakes and an accounting boost from its Commerzbank equity holding. The earnings figure was 7.7% higher than in the same period a year earlier, and exceeded the average analyst estimate by about 13%, based on forecasts gathered by Visible Alpha.

Shares in UniCredit rose more than 4% as of 0905 GMT on July 23.

(Editing by George Hay; Production by Streisand Neto)

((For previous columns by the author, Reuters customers can click on PROUD/liam.proud@thomsonreuters.com))