Breakingviews - UniCredit’s boss needs currency more than deals

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From Breakingviews: UniCredit’s new Chief Executive Andrea Orcel is a veteran dealmaker. But his best first deal at the 19 billion euro bank is not to rush into one at all, writes LJucca

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MILAN - UniCredit’s new Chief Executive Andrea Orcel is a veteran dealmaker. Yet, the 19 billion euro bank’s lowly stock price gives him a dull knife with which to carve up any transactions. The banker needs to first improve returns at Italy’s second-largest lender, bolstering his M&A currency. Orcel’s best first deal is not to rush into one at all.

Orcel, the former UBS head of investment banking who also spent two decades at Merrill Lynch, is known for his rainmaking and intimately familiar with his new employer. He joins 23 years after working on the merger of Credito Italiano and Unicredito that created UniCredit. He was also involved in UniCredit’s takeover of Germany’s HVB in 2005 and of Rome-based lender Capitalia two years later.

Yet, markets are not working in his favour. UniCredit shares are trading at just a third of tangible book value, among the lowest multiples for large euro zone banks. Using these shares to buy BPM with a 30% premium would cost him over 0.40 of the target’s book value, diluting UniCredit investors.

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