SG considers cross-border deal

A CROSS-BORDER deal with one or more foreign financial institutions looks likely to become the preferred option for Societe Generale as the French banking bid battle moves into the final straight this week.

The board of SocGen meets tomorrow, having lost the fight to acquire Paribas to its French rival Banque National de Paris.

BNP captured Paribas with 65 per cent of shareholders backing its offer. However, it failed in its attempt to acquire SocGen, capturing only 31.5 per cent of the shares.

SocGen is certain to reject BNP's claim that, having won Paribas, the 31.5 per cent of SocGen it has also acquired gives it effective control, enabling it to proceed with a $1trillion merger of all three banks.

Britain's CGU, the insurance giant, and the Spanish bank BSCH both bought shares in SocGen in the final stages of the bid battle and have made little secret of their desire to build on that relationship.

BNP is now counting on the intervention of Jean-Claude Trichet, the governor of the Bank of France, to tip the balance in its favour. The Committe des Etablissement de Credit, the French banking regulator which Mr Trichet chairs, has to decide tomorrow whether it will allow BNP to keep its minority stake in SocGen.

Andre Levy-Lang, the chairman of Paribas, is expected to tender his resignation over the next few days.

However, the board of SocGen will insist that BNP be forced to give up the stake, arguing that for it to retain a hostile blocking minority could lead to prolonged uncertainty and instability in France's largest retail bank.

BNP continues to insist that it has the upper hand, having won Paribas overwhelmingly. It claims that it was stopped from acquiring a majority of SocGen because 31.3 per cent of the bank's capital and 42 per cent of the votes were in the hands of the so-called noyeaux durs - shareholders who were bound by various agreements to support the management.

Under French takeover rules there is nothing to stop BNP now coming back with a second bid for SocGen. Sources close to the BNP camp believe that the French central bank governor could also authorise an exceptional extension to the BNP bid for SocGen.

BNP believes that some of the core shareholders who backed the SG management may switch sides. These include the insurer Allianz; Alcatel, the electronics company; the drinks group Pernod Ricard and the car company Peugeot.