July 2007

NEWS ANALYSIS: Societe Generale denies BNP bid

Private banking group Société Générale continues to deny that it is launching a bid for rival BNP Paribas. A spokesperson said Société Générale’s position had not changed and referred to chairman and CEO Daniel Bouton’s statement issued last month. “A transforming operation is neither necessary or urgent,” said Bouton. BNP Paribas meanwhile has not issued any statements on the possible merger and the spokesperson was not contactable at the time of going to press. A source close to the deal, however, hinted that Société Générale could be considering mergers in the future. “As I understand it the bank isn’t actively looking, as it’s done very well in the last few months and added to shareholder value. If an opportunity were to come along though it would look at it,” he said. Analysts insist that the deal could make sense for the banks if their respective bank and asset management business were to merge. “There is not much more to buy out there and Société Générale has already expanded eastwards into Europe. The timing is right for a merger as there is nowhere else in Europe to grow and instead of looking outside it could be looking internally,” says Phillip Silitschanu, director of European research at Aite Group. Société Générale has a strong presence in Eastern Europe, especially in Romania and is considering expanding into Russia and China. The merger would make both banks and their asset management businesses a major force to be reckoned with, both in France and in Europe. The combination would create Europe’s second biggest bank after London-based HSBC Holdings. “If it were to go ahead they would be as powerful as Crédit Agricole, who already has 30-35% of France’s asset management business,” adds Silitschanu. This is not the first time that attempts have been made to merge the two French businesses. A three-way merger between BNP, Paribas and Société Générale in 1999 was mooted but that fell through and there have been tentative attempts since then according to industry commentators. BNP Paribas has recently rebranded its asset management arm to BNP Investment Partners to boost its image. It is the fourth largest French bank-owned asset manager with e344bn in assets under management. Société Générale Asset Management (SGAM), meanwhile has e371.2bn in assets under management as of 31 March 2007. It covers all asset classes including equities, fixed income, balanced and alternative investments, where it has e66.6bn in assets under management. BNP Paribas has made a number of acquisitions itself over the past decade. Last year it purchased Banca Nationale del Lavoro (BNL) for a reported e9bn. In March this year BNP Paribas announced that its merger with the Italian bank had been approved. BNL operations that will be integrated with BNP Paribas as a result of the merger include the foreign branches located in New York, London, Madrid and Hong Kong. BNP Paribas holds 98.93% of share capital in BNL. In May this year speculation was rife about a possible merger between Société Générale and Milan-based UniCredit. But the rumours subsided after UniCredit bought Capitalia SpA for a reported e21.8bn. BNP Paribas’ shares rose by 1.5% after the merger with Société Générale was first announced in French daily paper Les Echos. According to the paper, Bouton hired two US investment banks, including Morgan Stanley, to assess and approach BNP Paribas. It also said the bid could turn hostile if a friendly merger was unsuccessful. News of the proposed merger between BNP Paribas and Société Générale  follows hot in the trail of Britain’s Royal Bank of Scotland (RBS) Group vying with Barclays to buy Dutch bank ABN Amro Holding NV for a reported e71bn. © fe July 2007

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