Tuesday, November 18, 2008

Belgian court rejects bid to suspend BNP Paribas buyout of Fortis

Tue Nov 18, 1:44 pm ET

BRUSSELS (AFP) – A Belgian court on Tuesday rejected a bid by Fortis shareholders to suspend the sale of the bank's Belgian activities to BNP Paribas, while ordering an enquiry into whether the sale price was high enough.

Ahead of the court ruling, trading in shares in Fortis bank was suspended on the Belgian and Dutch stock markets after the shares in the former Belgian-Dutch banking group plunged to 0.66 cents.

The company's shares were trading at about 30 euros in July 2007 before it became embroiled in the US-born bad loan crisis.

Small shareholders groups had brought the case to the Brussels trade court questioning the validity of last month's buyout, which was part of a broader deal organised to rescue the ailing bank.

Head judge Francine De Tandt ruled that the shareholders' complaint was admissible but solely based on price, hence the decision to set up an expert panel to look into that aspect of the deal.

She said that a suspension of the sale or asking a shareholders' meeting to validate it could jeopardise the whole deal and thus the survival of Fortis in any form.

The judge added that the company's 'code of conduct,' which foresees a general shareholders meeting for major decisions, did not have legal force under the firm's statutes.

Mischael Modrikanem, a lawyer for the plaintiffs, swiftly announced their intention to appeal the ruling.

"Obviously we are very disappointed by the fact that the court has validated all the operations," he said, while welcoming the establishment of the three-strong expert panel which will begin work next week on assessing the fairness of the sale price.

The judge did not explain the procedure if the panel decides the price paid was inadequate.

Earlier the Belgian regulator CBFA announced that "at Fortis's request" trading was being suspended in the afternoon for the rest of the day.

The Dutch markets authority AFM later confirmed its own suspension of Fortis trading following the Belgian move.

Under the deal announced last month, France's biggest bank agreed to take up to 75 percent of Fortis's Belgian banking operation leaving the other 25 percent, a blocking minority on strategic decisions, in the hands of the Belgian government.

BNP bosses announced last month that the deal would be financed by BNP Paribas shares, with the Belgian state taking a stake of "around 11.7 percent" in the French bank, making it the largest shareholder.

BNP Paribas put the value of the operation at 14.7 million euros (18.6 billion dollars).

The French bank also agreed to take over Fortis insurance activities for 5.7 billion euros.

The BNP Paribas deal in early October followed an original, hastily arranged rescue deal a week earlier, when Belgium, the Netherlands and Luxembourg announced a 11.2-billion-euro (15.5 billion-dollar) part-nationalisation of Fortis to prevent the US-driven financial crisis from claiming another victim in Europe.

Belgian Prime Minister Yves Leterme said last month his government was doing everything possible and was keen to reassure Fortis savers, clients and staff.

However, the Belgian leader had no such words of comfort for the bank's shareholders.

"A shareholder in a company takes risks," he said at the time.

No comments: