Commerzbank confirmed on Tuesday that it held discussions with UniCredit in recent weeks over a potential takeover but rejected the Italian lender's €35 billion offer, saying it did not offer sufficient value for shareholders.

The German bank's disclosure marks the first time either party has acknowledged talks, coming 18 months after UniCredit first revealed it was building a stake in Commerzbank. UniCredit launched its unsolicited all-share bid last month, acquiring a position of nearly 29 per cent through a combination of share purchases and derivative transactions.

"The cornerstones of a transaction outlined now verbally by UniCredit have, in Commerzbank's view, not demonstrated sufficient value creation potential for Commerzbank's shareholders beyond the current standalone strategy," the German lender said in a statement on Tuesday.

Commerzbank added that UniCredit had shown "no willingness" to offer shareholders an adequate premium, and that the unsolicited nature of the approach made it "difficult to build the mutual trust necessary for a successful transaction." The bank said it currently sees "no possibility of an amicable solution."

UniCredit chief executive Andrea Orcel had previously acknowledged the offer — which carried a premium of just 4 per cent at the time of announcement — was unlikely to secure outright control of the German lender. The Italian bank is seeking shareholder approval for a capital increase at an extraordinary meeting on 4 May to help finance the proposed deal.

Acquiring more than 50 per cent of Commerzbank's voting rights would carry an additional complication: UniCredit disclosed in documents published ahead of the shareholder vote that Polish law would oblige it to launch a bid for the roughly 31 per cent of mBank not already owned by Commerzbank, which holds a 69.1 per cent stake in the Polish lender. mBank carries a market value of $14.5 billion, according to LSEG data, and any mandatory offer would need to include a cash component under Polish rules.

UniCredit also warned investors in the same documents that uncertainty surrounding the pursuit and any eventual integration could prompt senior staff to leave both institutions, potentially resulting in client losses.

Commerzbank said it will publish upgraded financial targets alongside its first-quarter results on 8 May, a move intended to reinforce its case for remaining independent. "A significant part of the potential outlined by UniCredit is not based on a combination of the two institutions and can therefore also be realised by Commerzbank independently, without the significant execution risks associated with a transaction," it said.

The German government, which retains a stake of more than 12 per cent in Commerzbank, has previously stated its preference for the bank to remain independent. Commerzbank's board has similarly opposed UniCredit's overtures throughout the months-long pursuit. Shares in UniCredit fell 0.8 per cent in Milan on Tuesday, while Commerzbank dropped 0.3 per cent in Frankfurt.

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