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BNP's $37B bids stun rivals
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March 10, 1999: 8:34 a.m. ET
Hostile approaches to rivals SocGen and Paribas would thwart their merger plans
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LONDON (CNNfn) - In the largest hostile takeover bid in French corporate history, Banque Nationale de Paris launched a surprise $37 billion offer for rivals Société Générale and Paribas late Tuesday that threatens to foil those banks' merger plans while creating a nonpareil European bank with more than $1 trillion in assets.
BNP's bolt-out-of-the-blue bids for its compatriots was disclosed by France's financial market regulator well after the close of trade Tuesday and confirmed by BNP Wednesday.
It came about five weeks after SocGen unveiled plans to buy Paribas in a 15.1 billion euro ($17.26 billion) stock swap that would have created France's largest bank.
Prior to that merger decision, SocGen and Paribas revealed in a joint statement Wednesday, they had each given "detailed consideration" to a merger with BNP but ultimately ruled out a tie-up.
Calling the idea of a three-way merger "a hazardous venture", the target banks said they considered the offer unfriendly. Taking aim at their suitor, they said BNP had never discussed such a merger with either of their boards since Feb. 1 - the date of the announcement to create SG Paribas. The banks also said their boards plan to meet once they have received more details.
In reply, BNP's chairman, Michel Pebereau said in Paris Wednesday that while he would like to see a three-way merger, he could also go for a marriage with Paribas alone if that proves necessary, Reuters reported.
"We want this project to be carried out by all three," Pebereau said. "But if, by some extraordinary chance, Paribas shareholders accepted our offer while Société Générale's did not, we would go ahead with a link with Paribas."
Shares in all three banks were suspended on the Paris bourse Wednesday.
Major shake-out could loom
The twin takeover offer, if successful, will spawn a financial sector colossus that ranks among the world's leading banks in terms of assets.
It will also unleash a shake-out in the European banking sector at a time of hastening consolidation.
But for all the superlatives, the initial reaction to the offer Wednesday was tepid at best, with many analysts expressing skepticism.
"It's a bold deal," said Robin Monro-Davies, the Chief executive officer of Fitch IBCA. "I've got grave doubts as to whether it will go through though."
Monroe added: "There's a lot of theater in this."
The bid is likely to draw a sharp retort from both regulators and from the target banks, who may decide they have no choice but to shield themselves from the unsolicited advance by launching counter-bids for BNP, analysts said.
Nor is the French Socialist government of Lionel Jospin likely to readily condone a deal that conceivably may jeopardize thousands of jobs.
That possibility is more than a chimera, given the substantial overlap in the three companies' retail banking and investment operations, analysts said.
Some analysts discern an edge of desperation in the bid. The French government has already torpedoed BNP's efforts to take control of Crédit Lyonnais, the beleaguered state-owned bank slated for privatization.
Given this, and Paribas and SocGen's exclusive marriage plans, the bid underscores the degree to which BNP has found itself isolated on the French banking landscape, one Paris-based broker told Reuters.
"no collective layoffs"
Offering a glimpse of the potential deal-breaking stumbling blocks ahead, a BNP spokeswoman told Reuters there would be major consequences from the offers, which she described as "attractive" to the two companies shareholders.
But she added: "There'll be no collective layoffs, that's important."
Such comments may prove a weak tonic for jittery shareholders and the French government.
Nicolas Lecarpentier, a Paris-based banking analyst with Credit Lyonnais, said he believed the deal would be "positive" for the banking sector.
But others say any benefits may be offset by fears over job losses, an especially emotive issue in France, where companies have traditionally been wary of divulging workforce reductions until they have absolutely no alternative.
In previous deals, insurers Axa and UAP didn't mention layoffs in the initial flood of publicity surrounding their link-up. Only later did the magnitude of the reductions become apparent, analysts said.
Axa, which holds a 6 percent in BNP emerged as the bank's strongest ally Wednesday. Axa Chairman Claude Bébéar, who sits on the BNP board, voted in favor of the bid for SocGen and Paribas, Reuters reported
Axa was quoted through a spokesman as saying BNP had presented "a project which makes sense…with a commitment to resolve any social issues which may arise."
Taken alone, a SocGen-Paribas tie-up would have engendered Europe's second-largest bank in terms of total assets, at 599 billion euros ($652 billion), just behind Swiss behemoth UBS, with 636 billion euros ($692 billion), according to Salomon Smith Barney estimates.
A market cap of $56 billion
A three-pronged merger fusing BNP with SocGen and Paribas, by contrast, will have a stock market capitalization of 340 billion francs ($56 billion) and is likely to be the world's first bank with assets in excess of $1 trillion.
Under the bid's preliminary terms, as disclosed by France's CMF stock market watchdog, BNP will offer 11of its shares for every eight Paribas shares. The bank would swap 15 BNP shares for each seven Société Générale shares.
The offer for SocGen represents a 14 percent premium to its Tuesday stock closing price of 145.50 euros - valuing the deal at $18.40 billion - BNP said in a statement early Wednesday.
BNP is offering $18.65 billion for Paribas - an 18.2 percent premium to its March 9 closing price of 77.44 euros.
BNP said the banking triad would yield "recurring synergies" of about 1.27 billion euros ($1.38 billion) a year by 2002.
The bid could yet invite a counter-offer from other major European banks such as ABN-Amro or Dresdner Bank, analysts told Reuters - one which BNP would unable to top, they added.
--from staff and wire reports
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