FORTIS OPERATIONS:BNP PARIBAS is set to become the biggest bank in the euro zone in terms of size of deposits after taking over Fortis operations in Belgium and Luxembourg for €14.5 billion in cash and shares.
The deal was brokered by the Belgian government following the surprise nationalisation of the group's Dutch businesses.
The Dutch government said it regarded the new alliance between the Belgian and Luxembourg parts of Fortis and France's biggest bank as "a significant step towards greater financial system stability", Dutch prime minister Jan Peter Balkenende and finance minister Wouter Bos said yesterday.
The French bank will buy control of Fortis's banking businesses in Belgium and Luxembourg for €9 billion, funded through the issuance of 132.6 million new BNP shares at €68 a share.
BNP will also buy Fortis Insurance Belgium for €5.5 billion cash.
Baudouin Prot, BNP chief executive, said the takeover would boost earnings from the first year and would improve its capital ratios.
Its shares closed 5 per cent lower at €67.50.
The deal marks an end to Fortis's banking and insurance operations in the Benelux countries, leaving shareholders in the group with Fortis's international insurance business and a 66 per cent stake in a special vehicle that will hold Fortis's structured credit portfolio.
"The decisions of the past 10 days and of last night are drastic and we can even say painful for all those who've been building and supporting the Fortis project for the past 18 years," said Filip Dierckx, Fortis chief executive.
Under the deal the Belgian government will first take full ownership of Fortis Bank SA/NV in Belgium before selling on 75 per cent to BNP, while the Belgian insurance business transfers directly to the French bank.
Belgium will hold a 25 per cent stake in Fortis Bank.
BNP will hold a 10 per cent stake in the vehicle for Fortis's structured credit portfolio and the government will own 24 per cent. Fortis said it would transfer €10.4 billion in assets at a fair market value to the vehicle.
The Belgian government was forced to act after the Netherlands nationalised all Fortis businesses on its side of the border on Friday, prompting fears of a fresh rout in shareholder confidence in the remaining Fortis businesses. - ( Financial Times service)