Friday, August 6, 1999 Published at 23:55 GMT 00:55 UK
Business: The Company File
Final stand in French banking battle
Three-way scrap has caused a war of attrition in French banking
Bids have closed in the three-way merger battle that has turned France's banking sector into a bitter battleground.
It began six months ago with a friendly merger between Paribas and Societe Generale. Then in March, the Banque Nationale de Paris surprised everyone with a hostile bid for both.
It was an audacious move which, if successful, would create the world's biggest bank in terms of assets.
As the deadline approached for shareholders to cast their votes, both sides were claiming victory.
BNP said it would definitely win enough support to take over Paribas and SocGen. But these two banks were insisting that shareholders would instead back their own plans for a merger, in a tie-up that would not involve BNP.
Peace talks failed
The Bank of France governor, Jean-Claude Trichet - who chairs the bank regulator - has tried to get the three parties talking to each other, but with no success.
And some of those investors were taking a keen interest in developments. The UK insurance group, CGU, more than doubled its 3.1% stake in SocGen, and said it might increase it to 10%.
That brought a complaint from BNP and this week the regulator froze CGU's share purchase.
Germany's Dresdner Bank also upped its investment in BNP, to 2%.
Claim and counter-claim
BNP said it was confident that it would at least secure a majority stake in Paribas, claiming it has declarations of support from shareholders representing 49.6% of the capital.
"The scenario we see as most likely is that we'll gain 55 to 60% of Paribas capital," said BNP's president, Baudoin Prot.
But he was contradicted immediately by Paribas, who said SocGen would have a majority of the bank's capital.
In fact, for many investors and analysts, the big question is whether BNP can win control of SocGen.
There is a growing expectation among observers that BNP will win more than 50% of Paribas, but might not be so successful with SocGen.
"It is going to be very close," said Daniel Davies, bank analyst at Robert Fleming. "BNP will have enough of Paribas but probably not enough for SocGen. Everything depends on the regulator."
It would be up to the French bank regulator to decide whether BNP could claim effective control of SocGen, depending on the size of its stake.
But even if the regulator decides to allow BNP minority control, SocGen has a battle plan in place.
"And the probability that BNP wins it is not certain because the people who voted against - even if SocGen Paribas does not happen - are not necessarily in favour of the BNP-SocGen merger."
There are several other scenarios which are equally complex, but looking more unlikely. It could be that no merger takes place at all, and the sector continues as before but with a great deal of bad blood.
However, there are those who think a victory for BNP would be a welcome result, creating a French monolith bank which would be well-placed to take on the giant Wall Street institutions.
Whatever the outcome - and a final decision is not due for another 10 days - many in the banking sector will be glad to see this bitter battle come to an end.
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