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BNP down to the wire
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August 24, 1999: 8:42 a.m. ET
As 6-month battle reaches regulators, BNP banks on SocGen 'concession'
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LONDON (CNNfn) - After six months of jockeying, the fiercest takeover battle in French banking history is out of the hands of the financial markets and in those of France's banking regulator, which could render a decision as early as Tuesday.
Banque Nationale de Paris, certainly one of France's feistiest hostile suitors to date, still is hopeful for the outcome of its double-barreled bids for targets Paribas and Société Générale, analysts say.
Its success depends on being able to persuade regulators to share its vision of a world-beating bank with the wherewithal to compete with the Japanese, German and U.S. superbanks.
At issue is whether BNP should be allowed to retain its minority stake in SocGen, giving it 36.8 percent of the bank's capital and 31.5 percent of its voting rights, and proceed with a three-way link that would create the world's second-largest bank, with $1 trillion in assets.
BNP already has clinched a majority of Paribas and asserts it has "effective control" of SocGen.
SocGen counters that nothing short of an absolute majority should allow BNP to determine its fate and has urged regulators to force BNP to hand back its minority stake so SocGen can pursue alliances and expansion with partners of its choice.
Chairmen face "oral exams"
That argument will be reiterated Tuesday as SocGen Chairman Daniel Bouton and his BNP counterpart, Michel Pébereau, are summoned for individual interviews before France's 11-member CECEI regulatory panel. The interviews have been dubbed "oral exams" by pundits.
The least that can be assured at this point, analysts say, is that BNP's battle with SocGen to salvage its vision of a three-way blockbuster merger will come down to the wire.
In this context, analysts say, Pébereau's apparent concession Monday to let SocGen remain an "independent entity" during the initial stages of any three-way alliance is really a ploy to play for time.
In an interview with French news agency Agence France Presse, Pébereau was quoted as saying he is "ready for solutions leading to a pragmatic and gradual implementation of his rapprochement with SocGen."
That, of course, is what Bank of France governor Jean-Claude Trichet has been urging all along, an amicable (read "French") solution to the tussle that would prevent the possibility of an outsider breaching the traditionally staid ranks of French banking.
It is also a solution that SocGen has resisted with equal fervor, asserting that the shareholders have spoken and they are clearly opposed to a BNP takeover, by a two-thirds majority.
"This is a technical move by BNP, because what they want to do is take things slowly and wait a few months, keep talking about the (alliance), get out strong yearly figures and then relaunch the merger idea next year," said Benoit Vincenzi, a bank analyst with Fox-Pitt, Kelton in London.
Under BNP's proposal, outlined in the bank's filing to France's bank regulator, CECEI, SocGen would function as a "juridical entity," with its own autonomous board.
But the legal distinction will end up meaning little in practice, since SocGen's hands will be tied by BNP's blocking minority in the bank, according to a Paris-based analyst who wished to remain unidentified.
"A kind of masquerade"
"This is a kind of masquerade because in fact SocGen won't be fully controlled by BNP, yet BNP will get all the benefits of being able to block SocGen from doing anything to [thwart its own three-way merger plans]", the analyst said.
Allowing SocGen to remain independent for a limited period, the analyst added, would enable BNP to keep its three-way merger plans on a back burner without forcing a fresh bid right now, at a time when SocGen's stock price has been driven up by speculative buying.
"Whatever happens," the Paris-based analyst said, "if BNP gets 38 percent of SocGen's capital, during the next two years SocGen won't be able to merge with another bank…It's not a very sexy outcome. That's why I believe SocGen would have liked to see BNP retain below a 20 percent stake in the bank." 
--from staff and wire reports
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