French bank battle hots up as BNP sweetens its offer
BNP, which is bidding for the two other banks in an attempt to create a monster French banking group with $1 trillion worth of assets, yesterday raised its offer for Paribas by 12.4 per cent. The bank also raised its existing 11 for seven offer for SocGen by 5 per cent adding a 60 euros cash kicker for every seven Societe Generale shares tendered.
The move follows the collapse on Wednesday of attempts by Jean-Claude Trichet, the Governor of the Bank of France, to broker an end to the battle which has had three of France's major banks at each others' throats for five months.
Michel Pebereau the BNP chairman told analysts and investors in London yesterday: "This is the only way to make consolidation in the French banking system happen. I consider this is a very fair offer for shareholders." He insisted that even after raising the offers the three-way deal would be earnings accretive to shareholders of all three banks.
A joint SocGen/Paribas statement yesterday said the higher BNP offers were: "as unattractive as BNP's plans to merge three banks."
The fact that the offer for Paribas has been raised by a much steeper margin than the one for SocGen surprised the market which had been anticipating a higher offer for SocGen and a lower offer for Paribas. The bias suggests that BNP's advisors, Goldman Sachs and Lazard Freres now believe Paribas not Societe Generale is the battleground on which this bid will be decided.
Less than 45 per cent of Paribas' shareholders are so-called "Anglo-Saxon investors" who can be counted on to favour the BNP bids en bloc compared with 48 per cent of SocGen. Stephen Maxwell, a fund manager at Standard Life, said yesterday that the revised SocGen offer was "derisory."
However, he admitted that, taken together, yesterday's increased offers, which followed SocGen's move last month to raise its own offer for Paribas, were probably enough to tip the balance back in BNP's favour.
"Until yesterday it was very finely balanced. My feeling now is that they will scrape through." he said. Daniel Davies, European banks analyst at Robert Fleming said: "It is not a knock-out blow but it is a very strong raising of the stakes."
BNP shares slipped 1.7 per cent to 79.4 euros. Societe Generale rose 1.6 per cent to 175 while Paribas rose 3 per cent to 112.
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