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Stock-funded deals change the landscape in cross-border M&A

Investors' willingness to accept shares in foreign-owned companies could lead to a boom in European activity

Cross-border banking consolidation in Europe is here at last. UniCredit's current $18 billion offer for Germany's HVB, ABN Amro's offer for Italy's Banco Antonveneta and BBVA's bid for Italy's Banca Nationale del Lavoro all show the potential for dealmakers, following on from Santander's £8.5 billion ($15.5 billion) purchase of the UK's Abbey last year. "All of us in Europe have been waiting for a cross-border banking deal for ages. Suddenly there are two separate bids going on for Italian banks alone," says a prominent investment banker.

However, the Santander/Abbey and UniCredit/HVB combinations indicate a fundamental change in opinion among European stock investors, which could open the way for large-scale, stock-funded, cross-border European deals across all sectors. UniCredit wants to pay five of its ordinary shares for each HVB share. Under a deal agreed by both sets of management, UniCredit's Alessandro Profumo will be CEO of the combined group.

Santander's use of Spanish stock to buy a UK company last year was considered particularly innovative, but the deal was received well by both Abbey and Santander shareholders and the Santander stock price has experienced double-digit growth since. "The Abbey/Santander and now the UniCredit/HVB stock transactions show that the attitude of European investors has changed," says Dirk Albersmeier, head of M&A for Germany at JPMorgan, financial adviser to HVB along with Citigroup.

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