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New deal reached on Fortis asset sale to BNP
2009-01-30
BRUSSELS (AFP) - The Belgian government and BNP Paribas agreed on Friday to revise the sale of the Belgian banking assets of Fortis to the French bank after an initial deal left shareholders up in arms. Officials from the Belgian government, BNP Paribas and the embattled Fortis holding company thrashed out through the night a new deal under which the French bank would abandon plans to buy most of Fortis insurance business. Shareholders in the Fortis parent company baulked at the terms of the original deal because it left the holding company with little more than the group's worst assets, wiping out the value of their investments. "The improvements that have been agreed are in response to different proposals made by experts to improve the value of Fortis group," Belgian Finance Minister Didier Reynders said. According to a government statement, BNP would buy only 10 percent of the Belgium insurance operations for 550 million euros (709 million dollars), instead of 75 percent as planned in the previous agreement reached in October. The share of so-called toxic assets held by Fortis Holding, the only entity listed on the stock exchange, would be reduced to one billion euros, with Belgium providing a five-billion-euro guarantee. Meanwhile the state's investment would be reduced to 11.4 billion euros from the 14.9 billion foreseen under the original plan. The statement said the Fortis board had approved the agreement on the condition that it is accepted by shareholders, who meet on February 11. BNP investors welcomed the deal, bidding up the French bank's shares by 4.41 percent in midday trading to 30.80 euros while Fortis shares were suspended from trading. "The deal seems more positive for BNP Paribas due to its larger positive impact" on the bank's core capital reserves, said Deutsche Bank analyst Brice Vandamme. "But we find it difficult to find the true improvement in this proposal for Fortis shareholders. We have to wait for February 11 to see if Fortis shareholders will accept the deal." The government hopes minority shareholders will now back the sale of most of the group's Belgian assets to BNP after the initial deal was suspended by a Brussels court because they had not been consulted. This led to the transaction being frozen. As the global financial crisis undermined investor confidence, the Belgian-Dutch financial services group was broken up in October. The Dutch state took over its Dutch assets, and Belgium the Belgian banking assets. The Belgian state then orchestrated the sale of Fortis's Belgian banking assets and 75 percent of its Belgian insurance business, still owned by the holding company, to BNP Paribas. The dismantling of Fortis stripped the publicly traded holding company of its main assets, prompting shareholders to launch court action as their shares became next to worthless. In December, a Brussels appeals court backed their legal challenge, ruling that the minority shareholders should have been consulted first, and appointing the panel to review the operation. A court-appointed panel of experts on Tuesday backed the sale of Fortis's Belgian assets to the French bank but recommended that some conditions of the deal be re-negotiated. The collapse of Fortis caused considerable drama in Belgium and handed it the unenviable title of being the first country to lose its government due to the turmoil. The government of then prime minister Yves Leterme resigned in December over allegations that an official had sought to influence the court ruling that Fortis was broken up unfairly without consulting minority shareholders. Fortis Bank warned last week that its 2008 accounts were expected to show a loss of as much as 19 billion euros.
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