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UniCredit and HVB Join Forces to Become the First Truly European Bank

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO OR FROM THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN.

THIS ANNOUNCEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES; FUTURE OFFERS TO SELL OR EXCHANGE SECURITIES WILL ONLY BE MADE IN CERTAIN JURISDICTIONS AND ONLY FOLLOWING APPROVAL BY THE RELEVANT REGULATORS.

Leading position in the wealthiest regions and fastest growing markets in Europe.
The combination will be effected through a 5:1 exchange offer to HVB shareholders.

The key features of the transactions are:

  • Undisputed leader in Central and Eastern Europe (CEE) more than 2 times larger than second competitor by total assets
  • Enhanced and diversified business and geographic mixClear combination principles
  • Strong expected recurring earnings generation
  • Close to €1 billion of estimated annual pre-tax synergies fully realised by '08, of which over 90% resulting from lower costs and the remaining from increased revenues
  • Dieter Rampl to be Chairman and Alessandro Profumo to be CEO of the combined group
  • Combination to be implemented via share-for-share offer for HVB - UniCredit will offer 5 UniCredit ordinary shares per each HVB share
  • Management and Supervisory Board of HVB approve the transaction

UniCredit and HVB announce that UniCredit's Board of Directors and HVB's Management and Supervisory Board approved the combination of HVB and UniCredit. The Board of Directors of UniCredit and the Management Board of HVB, with the consent of HVB's Supervisory Board, resolved to enter into a Business Combination Agreement (BCA) setting out the terms of such combination.

Transaction Rationale
The combination will create a New Force in European banking with:

  • Customer base in excess of 28 million; over 7,000 banking branches in 19 countries and total assets of €733 billion
  • Leading positions in multiple neighbouring home markets (Italy, Germany and Austria) with a unique presence in Bavaria, Austria and Northern Italy, which represent one of the wealthiest regions in Europe
  • Undisputed leadership in CEE by total assets and number of branches
  • Balanced and diversified business portfolio

Commenting on the transaction Alessandro Profumo, UniCredit CEO said: "Together UniCredit and HVB will be a strong new force rooted at the heart of Europe with three neighbouring home markets straddling one of continent's most prosperous regions. We will become the first truly European bank combining our strengths to deliver enhanced service and innovation to our customers and increased value to our shareholders".

Commenting on the Transaction Dieter Rampl, HVB CEO said: "With this transaction, UniCredit and HVB are at the forefront of the European banking consolidation, which has enabled both of us to choose the best partner. We are creating new growth prospects for our shareholders, customers and employees, that none of us would have been able to achieve on a stand-alone basis. Germany will continue to play an important role in this first transaction of such magnitude in Europe".

The combined entity (the "Group") will have the following strategic goals:

  • Further strengthen its competitive position in its markets of presence
  • Maintain and leverage on its leading position in CEE
  • Optimise and consolidate operations in CEE markets, including leverage of joint branding
  • Exploit complementary strengths and critical mass in scale-driven business areas such as asset management and investment banking
  • Focus on growth in selected regions and business areas
  • Maximise revenue and cost synergies through sharing of best practices, optimisation of production capabilities and rationalisation of overlapping or duplicated functions

Details of the Transaction
The Transaction will consist of three voluntary share-for-share offers by UniCredit for HVB, Bank Austria and BPH which will have to be approved by the competent local authorities (the "Tender Offers"). The offers for Bank Austria and BPH will also comprise a cash alternative.

The HVB offer will be based on an exchange ratio of 5 new UniCredit ordinary shares for each HVB share. The exchange ratio implies a premium of 16.9% over HVB's 3-month average closing price on 10 June 2005 (1), or 10.4% over HVB's closing price on 25 May 2005 (2) (the day before the start of significant media speculation), implying, based on UniCredit closing price on 10 June 2005, an aggregate consideration of €15.4 billion for 100% of HVB's share capital.

The Bank Austria offer will be based on an exchange ratio of 19.92 new UniCredit ordinary shares for each Bank Austria share. The exchange ratio implies a premium of 16.9% over Bank Austria's 3-month average closing price on 10 June 2005 (1), or 12.1% over Bank Austria's closing price on 25 May 2005 (2).

The BPH share offer will be based on an exchange ratio of 33.13 new UniCredit ordinary shares for each BPH share. The exchange ratio implies a premium of 16.9% over BPH's 6-month average closing price on 10 June 2005 (3), or 21.6% over BPH's closing price on 25 May 2005 (2,4).

HVB has agreed not to tender its 77.5% stake in Bank Austria in the Bank Austria offer and will use its best efforts to ensure that Bank Austria does not tender its 71.2% stake in BPH in the BPH offer.

The exchange ratios would result in the issuance of up to a maximum of 4,685,272,585 new UniCredit ordinary shares for an aggregate value, based on UniCredit closing price of 10 June 2005, of €19.2 billion, €2.3 billion of nominal value and €16.9 billion of share premium, subject to the relevant corporate approvals, assuming 100% acceptance of the outstanding shares not currently owned by HVB in Bank Austria and by Bank Austria in BPH respectively of the Tender Offers in shares. The newly issued UniCredit ordinary shares will be entitled to a full 2005 dividend, payable in 2006.

Shareholders of Bank Austria and shareholders of BPH will also be offered a cash alternative, in compliance with local regulations. Shareholders of Bank Austria will be offered €70.04 per Bank Austria share as an alternative to the share-for-share Bank Austria offer and shareholders of BPH will be offered PLN 497.67 (€123.58 (5)) per BPH share as an alternative to the share-for-share BPH offer. These amounts reflect the average share price for the six months preceding the announcement of the Transaction (6). The price for the Bank Austria cash offer is subject to review and approval of the Austrian Takeover Commission.

Consummation of the Tender Offers will be subject to regulatory approvals (banking supervisory and merger control clearances). The HVB offer will be subject to a minimum acceptance level of 65% and the Bank Austria and BPH offers will not be consummated prior to the successful completion of the HVB offer.

UniCredit intends to list its ordinary shares on the official market of the Frankfurt Stock Exchange and on the Warsaw Stock Exchange.

Group Business Model and Corporate Governance
The Group will adopt a business and organisational model, divisionalised by client segment, consisting of the following main components:

  • Holding Company, to be located in Milan
  • Group-wide Divisions within the holding: four Business Divisions, a CEE Division and a Global Banking Services Division (as described below), including the related Product Factories
  • Regional Entities (Italy, Germany and Austria)

The divisionalised structure will enable the Group to maximise the value of each Division and Regional Entity in the relevant geographic areas and to co-ordinate the planning and business activities within the Group.

This business and organisational model envisages that the business activities in Italy, Germany and Austria will be segmented into the following four Business Divisions, which will be fully accountable for their relevant clients' segments:

  • Retail Division (to be located in Milan)
  • Corporates/SMEs Division (to be located in Munich)
  • Multinationals/Investment Banking Division (to be located in Munich)
  • Private Banking and Asset Management Division (to be located in Milan)

In addition, the CEE Division will be located in Vienna and comprise all operating entities in the individual CEE countries of the Group, including entities in Poland, Russia, the Baltic States and Turkey. The Global Banking Services Division, which will be located in Milan, will focus on providing global banking services throughout the Group. The group-wide Business Divisions will be mirrored by corresponding Business Lines at the level of each Regional Entity and the CEE Division. Similarly, the Global Banking Services Division will be mirrored by Banking Services Lines to be established at the regional level.

The product development for the Group will be performed in Product Factories, which will be separate platforms dedicated to the development and manufacturing activities for products for certain related business activities and will be allocated to the relevant Business Division.

UniCredit committed that HVB and Bank Austria will continue to exist as fully operational banks in their current legal form and will retain their current brand names, alongside with UniCredit logo. UniCredit considers HVB, Bank Austria and their major business activities as part of its core strategic assets. Following completion, the Group will consider the implementation of a new corporate structure by which UniCredit would ultimately hold direct participations in HVB, Bank Austria and in all the Product Factories. Further restructuring activities, such as mergers between entities operating in the same countries, will be considered to further optimise the Group's corporate structure model.

With respect to Corporate Governance, the holding company, UniCredit, will be governed through a one-tier system, with a Board of Directors and Statutory Auditors. The number of members of UniCredit's Board of Directors will be increased from 20 to 24, of which 1/3 including the Chairman - Dieter Rampl to be appointed in such position - will be proposed by HVB.

The BCA has a term of five years and amendments to the main points of the BCA require the consent of 19 out of 24 members of the Board of Directors.

A new Board of Directors shall be elected by the Ordinary Shareholders' Meeting of UniCredit to be held as soon as practically possible, after the completion of the HVB Offer, for a term of office of three years.

The Board of Directors will appoint the CEO and a Management Committee; the latter will advise the CEO and execute the management decisions adopted by the CEO in consultation with the Management Committee. The Management Committee will be accountable to the CEO.

The Management Committee will comprise:

  • CEO (Alessandro Profumo)
  • Head of Retail Division (Roberto Nicastro)
  • Head of Private Banking and Asset Management Division (Dario Frigerio)
  • Head of Corporates/SMEs Division, to be jointly proposed by the CEO and the future Chairman
  • Head of Multinationals/Investment Banking Division (Dr. Stefan Jentzsch)
  • Head of CEE Division (Erich Hampel)
  • Head of Global Banking Services Division (COO) (Paolo Fiorentino)
  • CFO (Ranieri de Marchis)
  • CRO (Dr. Michael Kemmer)
  • Integration Officer (Andrea Moneta) and Deputy Integration Officer, to be proposed by the future Chairman

Following the consummation of the Tender Offers, the Chairmen of the Supervisory Boards of HVB and Bank Austria, and the majority of the shareholder representatives of these two Supervisory Boards shall be representatives of UniCredit.

Value Creation
UniCredit and HVB estimate that a combination with HVB and Bank Austria will lead to pre-tax synergies of €985 million (post-tax synergies of €745 million) per annum fully realised by 2008, of which over 90% will be related to lower costs and the remaining to higher revenues through best practice transfer. Restructuring charges, prudently estimated by UniCredit and HVB at €1.35 billion (c. 150% of cost synergies), will be fully expensed by 2005.

It is expected that the Transaction will lead to:

  • Cash EPS neutral for UniCredit in '06, positive thereafter
  • Compelling EPS growth: CAGR '05-'07 of 26%
  • Significant internal capital generation: pro forma Core Tier I Ratio from 5.3% in 2005 to 6.4% in 2007
  • High profitability: Target RoE of 18% in 2007
  • Growing DPS year by year

Timetable
The Tender Offers are expected to be launched by the end of August 2005 with the offer periods expected to close within early October 2005. Consummation of the Tender Offers, i.e. issuance of new UniCredit ordinary shares against contribution of tendered shares, will occur after receipt of all required regulatory approvals (antitrust and banking supervisory approvals) and requires the approval by UniCredit's shareholders to increase UniCredit's share capital. Such approval will be sought at the UniCredit Extraordinary Shareholders' Meeting to be held on 27 July 2005.

Advisers
UniCredit is being advised by Merrill Lynch with Goldman Sachs acting as joint advisor. HVB is being advised by JPMorgan with Citigroup acting as joint advisor. Freshfields Bruckhaus Deringer is acting as international legal adviser to UniCredit and Cleary Gottlieb Steen & Hamilton LLP is acting as international legal adviser to HVB.

Subject to exceptions to be approved by the relevant regulators, if any, the Tender Offers are not being and will not be made, directly or indirectly, in or into, or by use of mails or any means or instrumentality (including, without limitation, facsimile transmission, telephone and internet) of interstate or foreign commerce of, or any facilities of a national securities exchange of, the United States, Australia, Canada and Japan and will not be capable of acceptance by any such use, means, instrumentality or facilities or from within the United States, Australia, Canada or Japan. Accordingly, copies of this announcement are not being, and must not be, mailed or otherwise forwarded, distributed or sent in or into or from the United States, Australia, Canada and Japan and persons receiving this announcement (including custodians, nominees and trustees) must not mail or otherwise forward, distribute or send it in or into or from the United States, Australia, Canada and Japan. Doing so may render invalid any purported acceptance.

The securities to be issued in the context of the Tender Offers have not been and will not be registered under the United States Securities Act of 1933, as amended (the "US Securities Act"), nor under any laws of any state of the United States, and may not be offered, sold, resold, or delivered, directly or indirectly, in or into the United States, except pursuant to an exemption from the registration requirements of the US Securities Act and the applicable state securities laws. This announcement does not constitute an offer to sell or the solicitation of an offer to buy any securities in the United States or in any other jurisdiction.

The Transaction will be presented by Mr Alessandro Profumo and Mr Dieter Rampl in the following events:

1. Analysts' and Investors' Presentation will be held in Milan, live webcast and transmitted via a telephone conference

Date: Monday, June 13, 2005

Venue: Milano, Palazzo Turati, Via Meravigli 9/b, Sala Conferenze, 1st floor

Time: 9:00 a.m. CET/8:00 a.m. GMT

To see the webcast (video), please connect to www.unicredit.it or www.hvbgroup.com/ir

To listen to the conference call (possibility to ask questions), please see the following dial-in numbers:
Italy: +39 06 452108266

Germany: +49 69 589990804

UK: +44 (0)20 8901 6984

No person located in the USA, Canada, Australia or Japan may participate in the call via the dial-in numbers (except pursuant to certain exceptions); measures will be taken in order to prevent such participation.

2. Press Conference in Munich


Date: Monday, June 13, 2005

Venue: Headquarters Bayerische Hypo- und Vereinsbank, Kardinal-Faulhaber-Strasse 1, 80333 Munich

Time: 1:30 p.m. CET

The press conference will also be broadcasted live via Internet at www.hvbgroup.com/press
The broadcast can be heard in German, English or Italian.

No person located in the USA, Canada, Australia or Japan may view the broadcast; measures will be taken in order to prevent such viewing.



NOTE
1 - Having as reference UniCredit 3-month average closing price on 10 June 2005
2 - Having as reference UniCredit closing price on 25 May 2005
3 - Having as reference UniCredit 6-month average closing price on 10 June 2005
4 - Based on €/PLN exchange rate on 25 May 2005 of 4.19
5 - Based on €/PLN exchange rate on 10 June 2005 of 4.027
6 - The relevant announcement date for purposes of the Austrian offer is 30 May 2005