French on trail of BZW

Barclays division fits with Societe Generale's fund management dreams, writes Nick Gilbert
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The Independent Online
France's largest bank by market capitalisation, Societe Generale, is running its slide rule over BZW, the equities and corporate finance business which was put up for sale by Barclays two weeks ago.

Under Marc Vienot, Societe Generale's much admired chairman who retires on 1 November, the French bank has been expanding its securities operations in London, New York and in the Far East in order to create a global universal bank. Barclays had similar ambitions until chief executive Martin Taylor persuaded his board into the dramatic U-turn on BZW's future.

Yves Tuloup, managing director of global equities at Societe Generale, confirmed the bank's interest. "We've been approached and we didn't say 'no' since there might be things of interest to us," said Tuloup. "What those things might be comes down to us taking a look."

But analysts reckon the odds still favour Credit Suisse First Boston, the investment banking arm of Credit Suisse Group, whose London headquarters are next door to BZW's new Docklands offices.

Societe Generale's ambitions to expand beyond commercial banking were underlined earlier this year when it moved quickly to hire Nicola Horlick, the high-profile "Superwoman" and ex-Morgan Grenfell Asset Management executive, to help develop Societe Generale's embryonic UK fund management business.

Attention has focused on BZW's perceived weaknesses in New York equities, a reason why its staff are said to favour a US buyer. CSFB has a major equity trading business in the US, yet it is relatively small in London which would reassure BZW staff that their jobs would be safe.

"There's little overlap," said Robin Down, analysts at ABN Amro Hoare Govett in London. "Credit Suisse doesn't really have a developed equity operation in the UK or a corporate finance operation and these would fit quite nicely."

Analysts believe that CSFB representatives have already met the heads of both the BZW equities and corporate finance divisions.

Yet Societe Generale itself also has a large and profitable US securities operation. In the past 18 months it has hired over 100 investment bankers and traders in New York from rivals like Nationsbank and Oppenheimer and Co, sometimes offering seven-figure salaries. Earlier this year Jean Huet chief executive of Societe Generale's US operation said: "Our goal is to be a universal bank."

Societe Generale employs around 1,000 people in London, including 200 in equities and derivatives, 140 in corporate banking and just 30 in mergers and acquisitions. Its shares have soared two-thirds this year, valuing the bank at pounds 9.1bn on the Paris bourse.

Meanwhile, as interested parties begin to study the initial sale documents put out by Barclays adviser Goldman Sachs, some analysts speculate that the BZW equities business may go to one buyer, corporate finance to another. And there are suggestions that a Japanese firm may be interested in backing Donaldson Lufkin Jenrette, one of the rumoured potential buyers, in a joint bid for BZW.

Mr Tuloup of Societe Generale himself hinted that the purchase of any part of BZW could be complex. "BZW certainly is a major firm, so the question is how to finance a big operation. Our job is to find out how to do it." Analysts have valued the BZW broking and corporate finance business at anything up to pounds 400m.

Analysts reckon other interested firms include Paribas and ING Barings. Travelers Group, owners of Smith Barney, has been reported to have considered a bid even though it is buying Salomon for $9bn (pounds 5.6 bn).

Additional reporting by Liza Roberts