French bank BNP Paribas and stricken Belgian financial group Fortis have agreed to revisions to the latter’s carve-up on Friday in a bid to convince Fortis investors angered by the initial terms to accept the deal.
The Belgian government, which announced the agreement early on Friday, hopes the modifications will finally put to rest the Fortis debacle, which led to the collapse of the former government last month.
BNP Paribas agreed in October to buy 75 percent of Fortis Bank Belgium and all of Fortis Insurance Belgium, leaving Fortis with just its international insurance operations and a majority stake in a portfolio of structured credit products.
However, that transaction, along with the Netherlands’ purchase of all of Fortis’ Dutch operations, was successfully challenged by Fortis shareholders. A Brussels appeals court ordered that shareholders be given a say.
Under the new terms, listed Fortis Holding would retain a 90 percent stake in the Belgian insurance business with BNP Paribas acquiring 10 percent for €550 million ($707.2 million).
Fortis Holding’s interest in structured credit products, generally referred to as toxic assets, would be limited to €1 billion ($1.286 billion). The Belgian state would provide a guarantee of some €5 billion ($6.43 billion).
Fortis Holdings would also no longer have to pay €2.35 billion ($3.02 billion) to cover perpetual convertible loans, known as CASHES. Finally, Fortis shareholders would have the right to any profit the Belgian State made on its holding of BNP Paribas shares.
Belgium received the shares when it sold a majority stake in Fortis Bank to BNP.
Fortis’ board had accepted the terms, pending approval from its shareholders, who are set to meet in Brussels on Feb 11.
Prime Minister Herman Van Rompuy told a hastily arranged news conference that he believed the agenda for that meeting could still be changed.
The new terms follow to some extent the recommendations set by a panel of experts appointed by the Brussels appeals court to review the deal. They released a provisional report on Tuesday.
“It responds to the different suggestions made by the experts to improve the value of Fortis,” Finance Minister Didier Reynders said. “The money issues are the most difficult… We have lowered the state’s investment, but instead accepted higher guarantees.”
The Belgian state’s investment would be reduced to €11.4 billion ($14.653 billion) from an original €14.9 billion ($19.134 billion).
Reynders added that trading in Fortis shares was likely to be suspended on Friday.
Fortis’ break-up early in October followed an €11.2 billion ($14.383 billion) cash injection a week earlier that failed to calm nerves.
Fortis investors saw their shares drop to below €1.00 ($1.285), compared with over €5.00 ($6.42) before the carve-up and almost €30 ($38.53) in April 2007, before the group launched its ill-fated joint purchase of Dutch rival ABN AMRO.
Fortis shares closed at €1.55 ($1.99) on Thursday.
(Writing by Philip Blenkinsop; Editing by Kim Coghill)
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