HVB takeover by Unicredito gets mixed response

The planned takeover of Hypovereinsbank (HVB) by Unicredito in Europe's largest cross-border bank merger caused jubilation in Italy but concern in Germany yesterday after news of an expected 9,000 job cuts.

The offer, accepted by the HVB board and expected to be concluded by October, would see Unicredito, Italy's largest bank, take over Germany's number two bank in an all-stock deal worth €15.4 billion.

"We are creating the first truly European bank," said Dieter Rampl, chief executive of HVB, on the deal that may trigger further consolidation in the European banking sector.

The bank has an operation in the IFSC. However, a larger part of the Irish business was formed into a separate company - Hypo Real Estate Bank - two years ago.

Around 7 per cent of the joint workforce is to be let go, Unicredito announced yesterday, including 1,800 jobs in Germany and many more at HVB's subsidiaries in Austria and Poland.

The redundancies, mostly in information technology and back office operations, are expected to come on top of 2,400 job losses in Germany already announced by HVB.

"There won't be cuts overnight, but rather a reduction," said Alessandro Profumo, head of Unicredito and chief executive of the new entity.

"After the deal is completed, financial discipline will be the key word," he said, saying the deal would lead to savings of €745 million by 2008.

German union officials said they had secured a deal from the Italians to delay job cuts for three years after the takeover.

The deal, if it is accepted and receives regulatory approval, would create Europe's ninth-biggest bank by market capitalisation with €733 billion in assets, 7,000 branches and more than 28 million customers from the Baltics through to Turkey.

Unicredito has offered five shares for each HVB share. Insurance company Munich Re, the largest HVB shareholder with an 18.3 per cent stake, has said it would "carefully review" the offer, after giving the proposals a generally positive response.

Another significant institutional investor, AGF, criticised the valuation of the German bank. "HVB is worth significantly more," said Rory Flynn, a fund manager with AGF International Advisors, whose parent company owns almost 1.5 per cent of HVB.

Italy's foreign minister Gianfranco Fini said news of the merger was "a very happy day for Italy and Europe" and another step towards greater economic integration in Europe.