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REUTERS
PARIS, MAR 12: Paribas Sa's supervisory board rejected Banque Nationale de Paris SA's takeover bid, saying it would lead to a dismantling of the French bank, and said it intends to forge ahead with its plans to merge with Societe Generale SA.
In a one-page statement issued after a lengthy board meeting, Paribas said BNP's offer "can't be considered friendly" and said the board reiterated its confidence in the "excellent industrial project" Paribas and Societe Generale aim to carry out.
Paribas's statement came two days after BNP stunned the European financial world by launching an unsolicited $37 billion double-barreled takeover bid for both Paribas and Societe Generale to create a new European banking powerhouse. That move would thwart the planned $17.2 billion friendly merger that Paribas and Societe Generale were in the process of completing.
People with knowledge of the board proceedings said the statement was approved unanimously, except for one abstention -- that of Claude Bebear, chairman of theAXA insurance group, which is also a shareholder in BNP and favors the three-way tie-up. Bebear also sits on Societe Generale's board, which meets Friday morning. In another sign that Paribas expects to put up a fight, it has retained Rothschild & Cie. Banque to help it in its defense.
Surging Shares Meanwhile, shares in all three banking groups soared in Paris Thursday as trading resumed after a one-day suspension. Paribas shares surged 18%, closing at 101.50 euros ($111.12), up 15.55 euros. Societe Generale shares gained 19.40 euros, or 13%, to 164.90 euros, and BNP shares rose 5.60 euros, or 7.2%, to 83 euros.
Analysts say the simultaneous rise of all three stocks shows that financial markets give BNP's plan a chance of succeeding, but also reflects the fact that the move could result in putting the entire French banking sector -- including BNP itself -- into play.
"The market is saying that BNP's project is relatively credible, but it also doesn't believe in it 100%" says Jean-Baptiste Bellon, abanking analyst at Deutsche Morgan Grenfell in Paris, adding, "There could be a counteroffer."
At this stage, people involved in the battle say the most likely option is for both BNP and SG Paribas, as the merged bank is to be called, to try to convince shareholders that their respective projects are better. Some don't rule out Societe Generale sweetening its stock bid by adding a cash payment, perhaps financed by bringing in new shareholders.
White-Knight Option Although a person involved in the battle says that "a white knight is not today's topic," another option would be to invite another bank to rescue them from the clutches of BNP.
The most likely candidates for such a move are ABN Amro Holding NV and ING Groep NV, both of the Netherlands, and Germany's Dresdner Bank AG and Deutsche Bank AG, say analysts.
"I am sure that the Breuers of this world ... have politely said, 'If you need us you can call us, " says a Frankfurt-based investment banker, referring to Rolf Breuer, Deutsche Bank'schairman.
Breuer has actively sought to expand in France, but was repeatedly rebuffed by French authorities, who favor a French solution to restructuring the country's banking sector. In 1997, Breuer made overtures to insurance giant AXA, and he has voiced his interest in Credit Lyonnais SA, which is being privatized.
Last week, the German bank indicated it had given up hope of finding a French mate by unveiling plans to build from scratch 10 retail branches and a remote-banking center in France. But BNP's bid could change things. A top Deutsche Bank executive said the bank is in a "wait-and-see" mode pending the formal response to BNP's bid by the two target banks, the French government and regulators. Even then, it's unclear whether the bank would enter the fray.
A senior banker at Resdner Bank, which has a cross-equity stake in BNP, echoed this sentiment. "We first have to see how the situation goes, and then we have to think about it," he said. The bank has not been holding high-level meetings onthe topic, he added.
Awaiting an Invitation What is clear is that any foreign bids would have to be invited, as German insurer Allianz AG was in 1997, when it rescued insurer Assurances Generales de France from a hostile bid by Italy's Assurazioni Generali SpA. The likelihood of an unsolicited, cross-border bid is almost nil, bankers agreed, especially since the government asked the opposing camps to bear in mind "the national interest" -- although the government's power to block a foreign bid is limited.
Of the two Dutch banks, ABN Amro is considered a more likely white knight. ING has focused its foreign expansion on small stakes in midsize companies, like BHF Bank AG in Germany and Credit Commercial de France. In a Swiss magazine interview earlier this week, ING's chairman, Godfried van der Lugt, said his top priority now is buying an American life insurer. ABN Amro, by contrast, has proved willing to do a cross-border deal, even a hostile one. Last May, it launched an unsuccessful $12.3 billion bidto buy Belgium's Generale Bank, which ultimately went to Fortis AG.
Many bankers believe that the current French bank drama, coupled with the coming privatization of Credit Lyonnais, will likely determine the way the sector looks in the new euro era. So if they want to play a real role in France, now is the time to make an attempt.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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