PARIS (Reuters) - BNP Paribas has walked away from a possible bid for smaller rival Societe Generale, which has been seen as a takeover target after suffering a rogue-trading scandal.
By Yann Le Guernigou and Sudip Kar-Gupta
PARIS (Reuters) - BNP Paribas has walked away from a possible bid for smaller rival Societe Generale, which has been seen as a takeover target after suffering a rogue-trading scandal.
"Given the persistent rumors, BNP Paribas clarifies that it has ceased to consider a potential tie-up with Societe Generale," BNP Paribas, France's biggest listed bank, said in a statement on Wednesday.
"If a French bank that knows the market doesn't want it, then it's unlikely that anyone else will," said Ion-Marc Valahu, head of trading at Amas Bank in Switzerland.
!ADVERTISEMENT!BNP Paribas shares were up around 5 percent in mid-morning while SocGen fell 7 percent. SocGen has a market capitalization of around 30 billion euros ($47.44 billion) while that of BNP Paribas stands at around 56 billion euros.
"It's obviously bad news for SocGen shareholders. Nevertheless, it was expected and we had anticipated it since BNP would not have taken that much time if it really wanted to make a bid," said Iris Finance fund manager Michael Sellam, who holds SocGen shares.
A source close to the matter said BNP Paribas came to its decision because of SocGen's opposition to any tie-up and as BNP would not make a hostile bid. The announcement means BNP Paribas is prevented from bidding for SocGen for six months.
In January BNP, which narrowly failed to buy SocGen in 1999, said it was looking at its rival. SocGen became vulnerable to a bid after announcing 4.9 billion euros of losses which it said were caused by rogue deals carried out by one of its traders. Jerome Kerviel.
The source said uncertainty in financial markets over the credit crisis and the investigation into Kerviel also contributed to BNP's decision.
"Trying to sell a deal like this in the current market environment is impossible," said the source.
BNP said the conditions were not right for a deal to take place. It added it was well-placed to continue growing its business and would focus on its existing retail banking, investment banking and asset management services.
SOCGEN NOT OUT OF WOODS
SocGen shares have fallen by more than 30 percent since the start of 2008, but hopes of a takeover bid have given a support to the stock.
Members of French President Nicolas Sarkozy's centre-right government have said they wanted SocGen to remain in French ownership, implying that BNP Paribas would have had an advantage over any foreign bank that might be interested in SocGen.
In February, a source familiar with the matter said BNP Paribas executives had sounded out the French government over its possible bid for SocGen.
Goldman Sachs and Lehman Brothers have been working with BNP. Goldman advised BNP in 1999 on its failed SocGen bid.
Earlier this month French bank Credit Agricole also said that although it was not planning any major takeovers this year, it would monitor the situation regarding SocGen.
Some analysts have speculated over a break-up of SocGen between BNP Paribas and Agricole, with BNP getting SocGen's retail bank and Agricole the investment banking division.
Despite criticism from politicians, including President Sarkozy, SocGen Chairman Daniel Bouton has remained in charge of the company, and last month he told Reuters he would continue with SocGen's standalone strategy.
SocGen this month completed a 5.5 billion euro rights issue to strengthen its balance sheet after the trading losses.
However, some analysts said BNP might revisit SocGen later in the year and that the French bank would look to see whether SocGen posts poor first- and second-quarter results.
"It makes sense for them to wait for SocGen to announce disappointing results," said an analyst at a U.S. investment bank who declined to be named.
(Editing by Quentin Bryar and David Cowell)
