The 'Heartwarming' Merger

UniCredito and HVB merger – at Moneyweek.co.uk - the best of the week's international financial media.

The takeover of HVB by Italian bank UniCredito is "heartwarming stuff", says Lex in the FT. The first "truly European bank" will operate in 19 countries, mostly in central and eastern Europe. Yet the deal is certainly not without its pitfalls: the central and eastern European region accounts for only 8% of the combined loan book which means that the duo's potential growth could just be "jam tomorrow".

This means it's really up to UniCredito to turn things around for the struggling HVB: with the German economy not exactly flourishing at the moment, the turnaround will depend largely on how "far and fast UniCredito can cut costs". It's not that the Italian bank will be unable to assist HVB: it has a strong track record at successfully integrating acquisitions, says Lex. But the combination between the two could just lead to a combination of Italian efficiency and German flair as opposed to the other way round.

Moreover, Munich Re, the German reinsurer which owns an 18% stake in HVB worth some 3bn euro won't be too happy with the all-share offer made by UniCredito, says Christopher Hughes on Breakingviews.com. With no cash exit, they may be tempted to cash in at least some of their HVB stock on recent strength. Yet selling a part of its stake may create the impression that Munich Re does not "support the deal after all". That could in turn set HVB shareholders off to oppose the merger which could result in the deal collapsing altogether.

It seems instead the solution for Munich Re, although tempted to sell its stock, is to hang on, says Hughes, or it may "trample on itself in the rush for the exit"

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