French bank BNP Paribas said it has called off its plan to buy a stake in Belgium’s Fortis, after the Brussels Court of Appeal decided to suspend the transaction for 65 days. [See IJ web site – https://www.insurancejournal.com/news/international/2008/12/16/96333.htm and https://www.insurancejournal.com/news/international/2008/12/15/96289.htm].
The deal was agreed as part of a rescue of financial group Fortis, severely weakened by the financial crisis, but it was also intended to improve earnings quality at BNP Paribas. Analysts said cancellation of the deal may now mean a rights issue by the French bank.
“Given the ruling by the Brussels Court of Appeal on Dec. 12, the acquisition of a stake by BNP Paribas in Fortis Banque cannot proceed as initially planned,” France’s biggest bank by market capitalization said in a statement.
BNP added that the shareholders’ meeting it had scheduled for Dec. 19 would no longer take place. It declined further comment on the situation and the Belgian government said it had no comment on the decision.
BNP Paribas shares were halted limit down and later were 6 percent lower at €32.125 [$46.88], with analysts saying that the uncertainty over the Fortis deal was weighing on the stock. The stock slumped 17 percent on Wednesday after BNP announced investment banking losses.
“We don’t know whether the Fortis transaction will take place or when it will take place and that’s bad,” said an analyst who declined to be identified.
“The Fortis deal was meant to have been accretive to BNP and was an attractive acquisition. Investors are now afraid of a capital increase at BNP,” added the analyst.
Fortis shares were up 12.5 percent at €1.08 [$1.58].
Fortis was carved up by the Dutch, Belgian and Luxembourg governments in October. BNP agreed to buy a majority of the Belgian assets after an €11.2 billion ($16.34 billion) cash injection failed to calm nervous investors.
However, earlier this month the Brussels court suspended the transaction for 65 days, and ruled that Fortis shareholders be allowed a say in the breakup of the bank and its takeover by BNP Paribas.
Belgian newspaper reports earlier in the week had suggested that the French bank might abandon the deal.
In October, BNP had agreed to buy the Fortis assets for €14.5 billion [$21.16 billion] and as part of the deal the Belgian government took a stake of 11.7 percent in BNP.
(Reporting by Dominique Vidalon and Helen Massy-Beresford; Editing by Andrew Callus)
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