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BNP targets lose in court
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June 17, 1999: 7:40 a.m. ET
Ruling against Paribus, SocGen paves way for French bank bidding war
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LONDON (CNNfn) - Banque Nationale de Paris won a round Thursday in its effort to acquire rival banks Paribas and Société Générale when a French appeals court rejected a legal challenge from both its takeover targets.
The widely-anticipated decision to allow BNP (PBNP) to proceed with the $37 billion in hostile bids clears the way for France's financial market watchdog, the Conseil des Marchés Financiers, to set a deadline for final offers.
The court found that the target banks' joint challenge to the regulator's decision to approve BNP's offer was admissible, but unfounded.
When BNP launched its surprise bid in early March, SocGen (SGLE) and Paribas (PPM) were putting the finishing touches on their own 15.1 billion euro ($17.26 billion) stock swap that would have created France's largest bank.
Prior to their merger agreement, Paribas and SocGen said they had each carefully considered a tie-up with BNP, but ultimately ruled it out. So, when BNP jumped into the fray, it was seen by its targets as a spoiler that would bring fewer long-term benefits to shareholders of a combined entity.
The acrimony increased earlier this week when SocGen, in an unexpected move, sweetened its offer for Paribas, adding a 1.5 billion euro ($1.57 billion) cash component to the bid and introducing a share buyback program. The move got the blessing of French insurance giant Axa -- a shareholder in all three banks and a former BNP ally.
SocGen's heightened offer for Paribas -- said to have infuriated BNP -- now puts the ball in BNP's court, analysts said Thursday.
"I think they have to respond and I think they have to respond with cash," said Sheila Garrard, an analyst with Lehman Brothers, based in London.
Garrard estimated that BNP has the scope to raise the value of its current offer for both banks by up to 15 percent, though that doesn't mean it intends to do so. BNP has itself indicated it has ample ammunition in reserve to shore up its offer.
According to Garrard's calculations, a three-way combination would add about 30 percent more value to the fused banks over a 12-month period compared with a 20 percent increase in value for a two-way tie-up between Paribas and SocGen. But Garrard acknowledged that this logic fails to hold when assessing the banks based on current share prices.
Paribas shares were up 0.17 percent at 115.0 euros in Paris Thursday, while BNP stock gained 1.5 percent to 85.80 euros. SocGen, however, shed 0.3 percent, to 182.7 euros, extending Wednesday's 1.5 percent slide.
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