French bank bidding war breaks cover

Credit Lyonnais has a number of suitors

A bidding war over Credit Lyonnais looks set to shake up France's banking industry.

Credit Agricole has launched a bid for Lyonnais, trumping the steady building of a substantial stake in recent weeks by BNP Paribas.

Credit Lyonnais' board has backed the proposal, whose 19.5bn euro ($20bn; £12.5bn) price tag - mostly in cash but with a proportion in shares - is 6% above the bank's market value.

Other shareholders including AGF, Germany's Commerzbank, and BBVA and Intesa from Spain - who between them hold 21.2% of the bank - are also in favour.

Bidding war

The saga of Credit Lyonnais kicked into high gear in November, when BNP Paribas agreed to take over the French government's 10.9% stake in a deal apparently wrapped up over a single weekend.

At that point the 2.2bn euro price tag represented a 49% premium, much more than Credit Agricole - the main suitor earlier in the year - had been willing to pay.

BNP's interest, and its subsequent purchase of more shares on the open market to take its stake to 16.4%, has sent Credit Lyonnais shares sky-rocketing.

But Credit Agricole had not given up its attempt to acquire Credit Lyonnais' 6 million customers and 1,800 branches across France.

From Credit Lyonnais' point of view, a buyout by Credit Agricole would mean both brands stay on the High Street, while backroom and investment banking would be pooled.

Not over yet

BNP could still counterbid, if it feels that Credit Lyonnais' shareholders or board are not united behind the Agricole proposal.

Lyonnais, which was only rescued from bankruptcy in the mid-1990s by a government bailout, is a choice prize.

Last year's net profits totalled 812m euros, on sales of 6.73bn euros.