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BNP Paribas becomes biggest Eurozone bank |
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Monday, 06 October 2008 |
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The private French bank has seized the opportunity to acquire the Belgian, Luxembourg and international banking and insurance elements of Fortis, the collapsed Benelux bank.
As stock markets crashed around the world, the French bank tied up a complicated deal to take over Fortis during the weekend of October 5 and 6. The Dutch parts of the bank are to be nationalised by the Netherlands government and are excluded from the transaction. BNP will own 75% of the shares of the Belgian part of the bank government with Belgian government retaining 25%. The Belgian government has expressed its satisfaction. Fortis is the biggest private employer in Belgium. In Luxembourg, BNP will own 66% of the shares and the Luxembourg government the balance.
The price to be paid is €14.5 billion. €5.5 billion will be paid in cash and €9 billion in BNP shares. In a statement to the press, the bank said that the deal was signed and that it was hoped to have the takeover finalised by the first quarter of 2009, subject to regulatory approval. The European Commission has already been consulted. The important presence of government shareholders will ”increase the financial strength of the bank and its own funds”, said Director General Baudoin Prot in a press conference in Brussels. He said he was pleased that the new bank will be the biggest deposit bank in the Eurozone, with France, Belgium, Luxembourg and Italy as its domestic markets. To safeguard Fortis as its share price collapsed, a special company was set up last week to hold the €10.9 billion of doubtful securities to be held by the Benelux governments. BNP will only acquire 10% of this company. The takeover has enabled BNP to raise its deposits to €600 billion and thus strengthen its balance sheet by €200 billion. In an open letter to clients and employees the BNP President writes that his bank has shown “quarter after quarter that it is one of the European banks the least exposed to the credit crisis, thanks to a rigorous risk management policy and a business model based around the real economy”. BNP shares have fallen around 4% since the beginning of the year as compared with an average fall of 32% for the banking share index.
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