In the small hours of yesterday morning, after a bitterly divided 11- hour meeting, the French banking regulatory watchdog ended a six-month campaign by Banque Nationale de Paris (BNP) to take over its rival Societe Generale and create the largest bank in Europe.
The Comite des Etablissements de Credit et des Entreprises d'Investissement (CECEI) ordered BNP to return the 37.15 per cent of SocGen shares that it scooped in a hostile public offer that ended in confusion and acrimony earlier this month.
BNP's hopes of creating a French banking champion, capable of dominating Euroland and competing in the world - both ambitions broadly supported by the French government - lie in tatters. The BNP president Michel Pebereau takes the consolation prize of the merchant bank Paribas, which was the object of the other part of his audacious double bid in March.
But BNP officials have made no secret of the fact that the real target was their rival retail bank, SocGen. Mr Pebereau proposed the hostile triple merger after SocGen cut off friendly but secret SocGen-BNP merger talks and announced with a flourish in February that it was linking up with Paribas.
After a six-month struggle, replete with insults and expensive advertising campaigns, BNP has wrested Paribas from SG's control but it has, in effect, ended up with the wrong bank.
SocGen will continue to stand alone for the time being but is expected to become the target for a number of foreign banks - exactly the outcome the French government wished to avoid. The French finance minister, Dominique Strauss-Kahn, said on Friday that the government would try to "strengthen" SocGen if it emerged still independent from the CECEI dis- cussions.
The committee, chaired by the President of the Bank of France, Jean-Claude Trichet, is independent but had come under discreet government pressure to find some kind of compromise that would serve French national interests. In the event, after talking solidly from 5pm to 4am, the CECEI decided that BNP's post-bid stake did not amount to a "manifest" or an "effective" controlling interest in SocGen.
It also decided that no "clear and concerted" future for SocGen could exist while more than one third of its shares were owned by its rival. In these circumstances, French law dictates that the bidding institution must return its shares to their original owners.
The outcome is a triumph, of sorts, for the SocGen President Daniel Bouton, who adamantly refused all pressure for a friendly solution that would limit the independence of his bank. He said: "I am delighted with the manner in which the CECEI has responded to the market's verdict at the end of this long and testing stock market battle. The decision to refrain from authorising BNP from retaining a minority interest is a victory for each of the bank's 58,000 employees."Reuse content