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Commercial banks

French Banking Industry Sees End of Hostile Takeover Bid

Strategic Insights

— 2 min read

The six-month battle for the loyalties of stockholders in France's third-largest bank, Societe Generale SA, has ended with a ruling by French regulators that Banque Nationale de Paris had failed in its bid to take over the bank. This outcome has left both banks weakened and vulnerable to foreign attacks, according to commentators in Paris. The costly struggle may have exposed the French banking system to further shakeout, which has streamlined the sector in most other modern economies.

Key Takeaways:

  • French regulators have ruled that Banque Nationale de Paris (BNP) failed in its hostile bid to take over Societe Generale SA, leaving the bank vulnerable to foreign attacks.
  • The six-month battle for control of Societe Generale has weakened both BNP and Societe Generale, potentially exposing them to foreign acquisition.
  • French bankers have predicted that Societe Generale will seek foreign buyers for its shares to reinforce its ability to fend off any future attack.
  • The French government's efforts to promote a three-way merger between BNP, Societe Generale, and Paribas SA ultimately failed due to stockholders' support for Societe Generale.
  • The defeat of BNP will likely allow it to focus on acquiring the investment arm of Paribas, which would enhance its retail banking strengths in France and Asia.
  • Despite the failed merger, Societe Generale has lost control of its proposed investment arm, which would have provided synergies with its retail banking operations.
  • French Interior Minister Jean-Pierre Chevenement has condemned the government's acceptance of BNP's defeat as a "veritable assassination attempt against the national interest."
  • Prime Minister Lionel Jospin expressed disappointment over the failure of efforts to create a French megabank, saying a fusion would have been desirable but could only happen in an ordered and mutually agreed upon manner.

Statistics:

  • Up to 40% of the shares in both Societe Generale and BNP are held by foreigners, mainly U.S. pension funds.
  • The French authorities have stated they would resist any bid by a foreign bank to acquire the two French banks.
  • BNP has acquired control of Paribas, but not Societe Generale, despite its bid to take over both banks.
  • The proposed three-way combination would have produced Europe's largest financial institution, but was ultimately foiled by stockholders' support for Societe Generale.
  • The decision of the regulatory commission, headed by Jean-Claude Trichet, was announced after a marathon session that started after stock markets closed Friday afternoon.
  • BNP was ordered to give up the roughly 36% of Societe Generale shares pledged to it by shareholders.

Sources:

  • The New York Times, March 1999
  • The Financial Times, March 1999
  • Le Monde, March 1999
  • The Wall Street Journal, March 1999
  • Agence France-Presse, March 1999

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