SocGen and Paribas reject unwelcome BNP take-over bid

The French banks Societe Generale (SocGen) and Paribas, which only last month announced their own merger, yesterday expressed opposition to a take-over bid announced on Tuesday night by the Banque Nationale de Paris (BNP.) If the bid succeeds, it would create Europe's largest bank in terms of assets, with around €1,000 billion (£787.6 billion). Mr Michel Pebereau, the chairman of BNP, shocked the banking establishment by launching the biggest raid in French banking history, offering a premium of 14 per cent over the value of SocGen shares and 18.3 per cent on Paribas shares - considerably higher than SocGen's friendly offer to Paribas shareholders.

In a joint statement, Mr Andre Levy-Lang, the chairman of Paribas and of the nascent SocGen Paribas, and Mr Daniel Bouton, the chairman of SocGen, said they had only learned of Mr Pebereau's offer at 8:30 p.m. on Tuesday, while attending a committee meeting on their merger. "At no time since (their two-way merger on) the 1st of February 1999 had the idea of a three-way merger been raised with the BNP," the two bankers said.

"Therefore, this operation cannot be presented as friendly," they continued, noting that both had previously rejected overtures from BNP. "Today, the triple rapprochement proposed by the president of the BNP strikes us as risky."

The French Finance Minister, Mr Dominique Strauss-Kahn, and the French Central Bank issued a joint statement saying they are "examining closely the consequences" of the take-over bid.

Mr Pebereau's swap offer of 15 BNP shares for seven SocGen shares and 11 BNP shares for eight Paribas shares could prove irresistible to investors. Mr Levy-Lang and Mr Bouton are searching for a counter-attack, while Mr Pebereau is gambling that they will want to find an amicable solution. If they do not, foreign banks may move in quickly.

Before leaving for London to explain himself to British bankers yesterday afternoon, Mr Pebereau told a press conference that he was not trying to take control of SocGen and Paribas but create a new entity, tentatively called SBP, in which all three banks would be equal partners. "Our plan will benefit the shareholders, the clients and the employees of the three banks," he claimed. "Our plan is to create a European banking champion."

Mr Pebereau told Le Monde that he was forced to act because the banking sector was being restructured so quickly. "I feel a very strong sense of urgency, linked to the arrival of the euro," he said.

The SocGen/Paribas merger lacked a wide retail banking base, he said, since Paribas had no retail network. The only possible merger of large retail banks in France was SocGen and BNP. Both are former state-owned banks. SocGen was privatised in 1987 and BNP in 1993 - by Mr Pebereau.

BNP's shares have risen 12.6 per cent since the bank announced record 1998 profits of 7.3 billion French francs on March 1st. By contrast, SocGen and Paribas shares have dropped 5.6 per cent and 6.5 percent since they announced their merger.

Mr Pebereau promised that there would be no mass firings among 130,000 employees in SocGen's and BNP's 4,700 retail branches across France if the take-over succeeded, a promise greeted with scepticism by trade unions. SocGen and BNP have competing outlets and there would be a strong temptation to close some branches. Mr Pebereau said that "synergies" would save 8 per cent of total operating costs for the three banks, or €1.27 billion in 2002.

French analysts called Mr Pebereau's raid clever but desperate. Although a highly respected banker, his take-over bids have repeatedly failed.