French Regulatory Authorities to Decide Fate of Banque National de Paris' Stake in Societe Generale

Strategic Insights -

The fate of Banque National de Paris' (BNP) 36.5% minority stake in Societe Generale (SG) hangs in the balance as French regulatory authorities are poised to make a decision this week. The outcome will determine the extent to which the French authorities can pursue their policy of fostering "national champions." The decision comes after SG's refusal to entertain any deal with BNP, which torpedoed its long-term strategy by snatching Paribas, its chosen merger partner. The authorities are anxious to avoid further embarrassment following the failure of an intervention in June to end the takeover battle through a friendly tie-up between the two retail banks and Paribas.

Key Takeaways:

  • The French regulatory authorities will decide whether BNP can retain its 36.5% stake in SG, which carries 31.5% of voting rights.
  • The authorities are concerned that blocking BNP's plans for an alliance with SG would leave the latter vulnerable to bids by foreign institutions.
  • BNP claims it has the "effective control" demanded by bank regulators as the largest shareholder of SG.
  • The decision may be delayed due to a Paris court's judgment regarding the acquisition of 4% of SG shares by CGU, a UK insurer.
  • BNP's head, Michel Pebereau, had made SG his main target, citing potential synergies between their retail operations.
  • SG's head, Daniel Bouton, insists that he cannot be forced to strike an alliance with BNP, citing the bank's rejection by two-thirds of its shareholders.
  • The French authorities' policy of fostering "national champions" is at stake, with the outcome determining how far they can pursue this goal.

Statistics:

  • BNP's 36.5% stake in SG carries 31.5% of voting rights.
  • The French regulatory authorities are concerned that SG would be vulnerable to bids by foreign institutions if BNP's plans for an alliance are blocked.
  • CGU, a UK insurer, acquired 4% of SG shares off-market, which is currently frozen by regulators due to queries regarding the transaction.
  • BNP owns 65% of Paribas' shares, but has laid out no clear strategy for linking with the prestigious investment bank.

Sources:

  • Financial Times Limited 1999. All Rights Reserved.