BNP Paribas has agreed to take control of Fortis's operations in Belgium and Luxembourg, as well as its international banking franchises, for a total consideration of E14.5 billion.
This transaction provides BNP Paribas with the opportunity to roll out its integrated banking model further in Europe. As a result of this transaction, BNP Paribas will have two new domestic markets, Belgium and Luxembourg, to add to its existing domestic markets in France and Italy.
The businesses acquired consist of Fortis operations, excluding the Dutch operations acquired by the Dutch government. In particular, the acquired operations includes 1,458 branches located in Belgium, Luxembourg, and all other countries except the Netherlands, as well as the Fintro branch network in Belgium; insurance business in Belgium; investment management activities, including former ABN Amro Asset Management; private banking business outside the Netherlands; merchant banking activities outside the Netherlands; and consumer finance activities outside the Netherlands.
Following the acquisition by the Dutch government of Fortis Bank Nederland Holding, including Fortis’s interest in ABN Amro Holding and the Dutch insurance activities, the Belgian government will raise its stake in Fortis Bank to 100%.
Under the terms of the transaction, BNP Paribas will then acquire from the Belgian government 75% of Fortis Bank and 100% of Fortis Insurance Belgium, and acquire 16% of Fortis Banque Luxembourg from the Luxembourg government, taking its controlling interest in Fortis Banque Luxembourg to 67%.
The total consideration for the transaction will be E14.5 billion. BNP Paribas will acquire its interest in Fortis’s banking business in Belgium and Luxembourg for E9 billion paid in approximately 132.6 million newly-issued BNP Paribas shares. Fortis Insurance Belgium will be acquired for a cash consideration of E5.5 billion.
As a consequence, the Belgian and Luxembourg states will become shareholders of BNP Paribas, with stakes of 11.6% and 1.1% respectively, and Belgium is expected to appoint two new members to join the BNP Paribas board. The Belgian government’s stake will be subject, for up to 10% of BNP Paribas’ capital, to a two-year lock-up. The 50% stake owned by Luxembourg will be subject to a lock-up period of one year.
BNP believes that this acquisition will reinforce its diversified and balanced business mix, with retail representing 57% of the group’s proforma revenues.
The agreement for the purchase of the acquired businesses has been signed and closing is subject to antitrust and regulatory approvals. 88 million shares will be issued pursuant to the standing authorization granted to the BNP Paribas board, while the issuance of a further 44 million will be submitted to an extraordinary general meeting of BNP Paribas shareholders. Closing is expected to take place by 2008 year-end or in the first quarter of 2009.