(AFP) – Jan 31, 2008
PARIS (AFP) — French bank BNP Paribas revealed Thursday it was weighing a bid for stricken national rival Societe Generale, a move that would find political backing by preventing the lender falling into foreign hands.
Societe Generale is fighting to discourage potential takeover bids and raise 5.5 billion euros in fresh capital, a week after announcing losses of 4.8 billion euros (7.1 billion dollars) blamed on a rogue trader.
A spokeswoman for BNP Paribas, France's top bank, said Thursday it was considering making a bid: "We are thinking (about it), simply because all of Europe is thinking about it," she said.
But foreign banks including Britain's HSBC and Barclays, Germany's Deutsche Bank, Spain's Banco Santander and Italy's UniCredit have also been cited as potential suitors.
As a result, there has been mounting speculation the French government is planning to back a merger between BNP Paribas and Societe Generale to preempt a foreign move.
Prime Minister Francois Fillon fired a warning shot earlier this week, insisting Societe Generale should remain a "great French bank" and that the government would fight off "hostile raids."
French resistance to outside bidders seems certain to spark opposition at the European Union's executive commission, where voices have already been raised against any French government interference.
BNP is in a position of strength after reporting a record estimated profit of 7.8 billion euros for 2007. According to the business daily Les Echos, BNP has already drafted in advisors and is actively preparing a bid.
The bank's chairman Michel Pebereau met in recent days with advisors to President Nicolas Sarkozy, although BNP denied they discussed Societe Generale.
And Sarkozy's office insisted a takeover was "not on the cards."
"For the time being, it is not an issue, since as far as we know Societe Generale is under no obligation to seek a tie-up," said presidential spokesman David Martinon.
Societe Generale shares gained 1.71 percent Thursday to close at 83.20 euros on the reported BNP takeover scenario. BNP shares by contrast fell 1.50 percent to finish 65.83 euros.
"The prospect of a French-French alliance is clearly favored by the market and the range that has been circulating, 92 to 100 euros a share, appears credible," said Frederic Rozier, an asset manager with Meeschaert.
A BNP-Societe Generale tie-up would create a French national banking "champion," with 15 million clients and a market capitalisation of 100 billion euros, making it the second-largest bank in Europe and the seventh largest in the world.
The European Commission has warned France not to discriminate against foreign banks and the chairman of the Eurogroup of finance ministers, Jean-Claude Juncker, repeated that advice on Thursday.
"I would fully understand the wish to exclude from the game those who nourish hostile feelings towards France and Societe Generale," Juncker told Europe 1 radio.
"If someone friendly comes forward with a strong economic project to offer, why refuse it? Simply because it is not French?"
But Sarkozy's close advisor Henri Guaino repeated the state would "intervene if it considers it necessary" to protect its flagship bank.
"The state will not just stand by and watch," Guaino told RMC/BFM-TV. "We will not leave this company at the mercy of any old predator."
"Every time there is an attack on the banking system, every government in Europe is active, they intervene ... France is just like the others."
Thursday's takeover talk prompted a protest demonstration by about 4,000 bank employees in front of Societe Generale headquarters in Paris, the bank said.
Another minor demonstration involving 300 employees took place in front of another Societe Generale office in the Paris area.
Fighting a storm of criticism over the rogue trading scandal, made worse by two billion euros of losses in the US subprime loan crisis, the board of Societe Generale decided Wednesday to keep chairman Daniel Bouton in place.
Bouton successfully fought off a hostile takeover from BNP Paribas in 1999 and said Wednesday he was confident the bank could preserve its independence.
Societe Generale accuses 31-year-old trader Jerome Kerviel of stealing computer codes and falsifying documents to place more than 50 billion euros (73 billion dollars) in futures trades.
Kerviel has been charged with falsifying documents and unauthorised computer access. He has told prosecutors that his bosses must have been aware of his dealings because of the profits he was generating.
In the latest development, a judicial source said Thursday that French police seized a personal computer belonging to Kerviel during a search of his brother's apartment on Wednesday.
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