After 40 hours of fruitless talks between the chairmen of the three largest French banks, Jean-Claude Trichet, the governor of the Bank of France, yesterday admitted his attempts to engineer a deal had failed and called a halt to negotiations.
Mr Trichet said it was now up to the market to decide between the two competing bids - the $21bn merger between SocGen and Paribas or the rival three- way bid proposed by BNP. The one proviso is that there is a clear result. Mr Trichet said that in the event of an inconclusive outcome he was not prepared to accept that one bank should end up with a blocking minority in another.
He said that if no bank emerged with a clear majority, the banks would be required to come up with an agreed deal with or without his intervention.
The Bank of France is expected to formally approve SocGen's higher bid for Paribas within the next few days. The Bank had withheld its approval for the improved offer tabled by SocGen on 14 June pending the outcome of the talks.
BNP is expected to sweeten the terms of its all-share 15 for seven offer for SocGen with a top up of cash, while leaving the terms of its bid for Paribas unchanged. Its advisers believe that if it wins control of SocGen it can still win Paribas by default even if a majority of Paribas shareholders support the higher SocGen offer for the bank.
BNP is mainly interested in getting control of SocGen with its extensive retail branch network and would be happy to let go of Paribas, a mainly but not exclusively wholesale bank. However, advisors to Paribas believe that to win outright and avoid a further round of discussions with Mr Trichet, SocGen must win support of a majority of shares in both banks.
Although Paribas is confident of the support of around 33 per cent of SocGen shareholders for the SG Paribas deal, at least 48 per cent of its shares are in the hands of foreign investors who are believed to overwhelmingly back the BNP deal.
BNP, which could come back with a higher offer, has sought to pin the blame for the failure of the talks on the chairmen of SocGen and Paribas.
While BNP had been willing to drop its demand for a full-scale merger of all three banks and settle for a compromise deal involving various permutations of the banks' retail and wholesale operations, the chairmen of SocGen and Paribas, Daniel Bouton and Andre Levy-Lang, had insisted that none of the variations discussed was sellable to shareholders. The Bank of France's announcement was welcomed in the stock market where the shares of all three banks gained.Reuse content