Germany just told one of Europe’s largest banks to back off. The German government has formally rejected UniCredit’s €39 billion unsolicited bid for Commerzbank, making clear that keeping the country’s second-largest lender independent is a matter of national economic priority.

The offer Commerzbank didn’t want

UniCredit formally launched its unsolicited takeover offer on May 18, proposing a share-swap deal of 0.485 new UniCredit shares for each Commerzbank share. That valued Commerzbank at roughly €39 billion, implying a price of around €30.8 per share, representing only about a 4% premium to Commerzbank’s share price at the time.

Commerzbank’s board rejected the bid, citing three main objections: the premium was insufficient, the offer undervalued the bank relative to market prices, and UniCredit’s exposure to Russia posed material risks.

The German government’s position was even more blunt. Chancellor Friedrich Merz’s administration had already labeled the potential takeover “unacceptable” back in March, well before UniCredit’s formal offer landed. Berlin’s reasoning centers on Commerzbank’s role as a primary lender to Germany’s Mittelstand, the small and medium-sized enterprises that form the backbone of Europe’s largest economy.

UniCredit isn’t exactly backing down

Despite the rejection, UniCredit had accumulated a 34.4% stake in Commerzbank by early June. That’s a massive foothold, one that makes UniCredit by far the largest single shareholder. The stake-building activity began well before the formal offer.

The formal tender offer hasn’t been a runaway success. Acceptance levels sat at roughly 11% as of mid-June. The low acceptance rate has sparked mutual accusations of abnormal tender behavior. Commerzbank escalated things further by lodging formal complaints with BaFin, Germany’s financial regulator, alleging unusual tender activity linked to UniCredit-related entities.

UniCredit has kept its voluntary exchange offer open with the stated intention of accumulating more shares.

What this means for investors

UniCredit now holds a massive stake in a bank it can’t fully acquire. For Commerzbank shareholders, if UniCredit eventually begins unwinding its 34.4% position, that would create significant downward pressure on the share price.

The BaFin investigation adds regulatory uncertainty. If the regulator finds merit in Commerzbank’s complaints, it could impose restrictions on UniCredit’s ability to accumulate additional shares or influence the outcome of the tender.