The court ruled that the French stock market authorities were correct in declaring legal a bid by Banque Nationale de Paris (BNP) for the other two banks.

The decision marks the latest twist in a lengthy saga that is set to reshape the landscape of French banking.

Bidding saga

In February, Societe Generale offered five of its shares for eight Paribas shares.

BNP leapt in with a rival deal that would effectively bring all three banks together, a proposal that Societe Generale and Paribas have been fighting hard.

The court said on Thursday that the SG Paribas camp had an inherent interest in contesting the stock market regulator's decision to let the BNP bid go through since the BNP bid is a competing offer.

Shares in Paribas rose steeply on Wednesday after Societe Generale raised its offer for the bank in an attempt to keep its massive rival at bay.

Paribas shares rose 3.2% in morning trading to 118.00 euros, after they were suspended on Tuesday following Societe Generale (SocGen) improving its offer for the bank by 1.5 billion euros.

Merger could result in Europe's second largest bank

SocGen shares slumped on Wednesday morning , down 1.34% to 183.50 euros, while BNP shares saw little change, down 0.30% to 83.75.

SocGen's new bid for Paribas remains at five of its shares for eight Paribas, but adds a 75 euro cash offer for every eight Paribas shares.

It is also proposing a second formula of two SG shares for three Paribas.

Market watchers expect BNP to reply in kind. Third party counterbids can be placed five days before the close of a tender offer. However, BNP has the right to improve its offer for Paribas and Societe Generale shares until one day before the close.

BNP is offering 11 BNP shares for eight Paribas shares, and 15 BNP shares for seven Societe Generale shares.

Should BNP succeed in its bid, it would create the world's first $1 trillion bank in terms of assets.

If the Societe General/Paribas merger goes ahead, the new group will overtake Credit Agricole to become the largest banking group in France, and the world's fourth largest, with profits last year of 2.1bn euros ($2.4bn, £1.4bn).