UniCredit has initiated a bid to acquire Banco BPM for 10.1 billion euros ($10.6 billion), coinciding with stalled plans for Commerzbank in Germany.

The Italian government, led by Giorgia Meloni, is wary of the merger's potential to create a dominant banking entity, particularly concerning its impact on plans to re-privatize Montepaschi di Siena.

Banco BPM, formed from the merger of Banco Popolare and Banca Popolare di Milano in 2017, is Italy's third-largest banking group.

The merger is projected to generate significant financial benefits, including €1.2 billion in annual gains, with €900 million in cost savings expected within two years.

Both the Italian and German governments are showing reluctance towards domestic mergers, reflecting a cautious regulatory environment.

Deputy Prime Minister Matteo Salvini has criticized UniCredit's focus on Italy, questioning the implications for the banking sector and the role of the Banca d'Italia.

Italian Economy Minister Giancarlo Giorgetti has indicated that the government has not agreed to UniCredit's offer and may intervene using a 'golden share' mechanism.

Since announcing its acquisition of Anima, Banco BPM's shares have risen by approximately 5.3% since early November.

UniCredit's CEO Andrea Orcel is aware of the government's critical stance and aims to address these concerns while pursuing the merger.

Giorgetti has expressed that UniCredit's approach could lead to complications, warning that the bank might be fighting a war on two fronts.

If the merger succeeds, it would create Europe's third-largest lender by market capitalization, with a combined market cap of €78 billion.

Relations between Orcel and the Meloni government have been strained since UniCredit's decision not to acquire BMPS in 2021, which had been anticipated by the Treasury.