Italy's UniCredito said on Monday it was in talks to take over Germany's second-biggest lender, HVB Group, in what could be a 16 billion euro deal to create Europe's ninth-biggest lender. But both banks cautioned in a joint statement that "no agreement has been reached and the outcome of the discussions is still subject to considerable uncertainty". If successful, the takeover would be Europe's biggest cross-border deal to date, pipping the purchase by Spain's Santander of Britain's Abbey National for 9.65 billion pounds, and the first foreign take-over of a major German bank.
HVB's largest shareholder, Munich Re, signalled it could sell its 18 percent stake on Monday.
Asked by Reuters whether it could sell to UniCredito, a spokesman for the German insurer said: "We will not stand in the way of sensible consolidation ideas."
The planned buyout comes on the heels of attempts by ABN Amro of the Netherlands and Spain's BBVA to take over two Italian banks.
News reports have said an all-paper deal could value Munich-based HVB at around 22 euros per share, or 16 billion euros ($20.11 billion) in total.
Sources close to the issue on Friday told Reuters that details, including price, had not been finalised.
Italian financial newspaper Il Sole 24 Ore said on Saturday that UniCredito could offer Munich Re cash for its stake and pay for the rest in stock.
A deal would make UniCredito a leader in central and eastern Europe, where it already has a strong presence, through HVB's profitable unit, Bank Austria Creditanstalt. It probably fuel desire among rivals to overcome longstanding regulatory and cultural barriers and consolidate across borders.
The Wall Street Journal said on Monday that Germany's Commerzbank could be the next target of Europe's merger frenzy, fuelling a nearly 3 percent rise in its shares.