Fortis Delays Vote on BNP Deal

Fortis NV Wednesday postponed a shareholder vote until April 28-29 on the sale of its former banking arm to BNP Paribas SA, casting fresh doubt over whether it can complete the deal.

Fortis investors, who blocked BNP’s purchase of 75 percent of Fortis Bank from the Belgian state last month, were due to vote on revised conditions for the deal at meetings in the Dutch city of Utrecht on April 8 and in Brussels on April 9.

“A vote on the issue will take place during the ordinary shareholders meeting … on April 28 and the annual shareholders meeting on April 29…,” Fortis said in a statement.

The move followed a ruling from the Brussels Court of Appeal that only shareholders who held stock when Fortis was broken up in October would be allowed to vote in Brussels.

The ruling could swing the vote in favor of the “no” camp, as well as giving Fortis organizational headaches. Shareholder registrations for the meetings were to have closed on Thursday.

Fortis has meanwhile decided to launch an appeal against Tuesday’s court ruling. That is set to be brought before the appeal court on Thursday.

At 15:10 GMT Fortis’s shares were up 0.5 percent at €1.39 ($1.85) euros, while the DJ Stoxx European banking sector index was 3.4 percent higher. BNP Paribas shares were up 5.0 percent at €32.68 ($43.48).

Fortis was carved up by the Belgian, Dutch and Luxembourg governments in October after an €11.2 billion ($14.89 billion) cash injection failed to calm investors.

The Dutch business has already been taken over by the Netherlands and Belgium owns the Belgian banking arm Fortis Bank. But BNP’s planned purchase of most of Fortis Bank from Belgium and a part of Fortis Insurance Belgium from Fortis itself is in limbo.

The court’s ruling that only investors who held shares on October 14 are eligible to vote increases the chance of a ‘no’ vote. This group rejected the BNP deal by a tiny 50.26 percent in February.

If repeated, many analysts believe BNP would walk away from the deal. Fortis would be left with its insurance operations, with its banking arms still in state hands, and potentially a far larger amount of toxic assets.

Analysts argue that more recent shareholders, including hedge funds, would be more inclined to vote ‘yes’ given that they are eyeing potential profits, rather than huge losses.

KBC analyst Dirk Peeters said the ruling meant the group of shareholders eligible to vote was becoming ever smaller and the influence of Fortis’s largest shareholder Ping An, which voted ‘no’ in February, was growing.

The Chinese insurer, which owns 4.99 percent of Fortis, is expected to announce later this week how it will vote.

Bank Degroof analyst Ivan Lathouders said a postponement of the shareholder meetings might also force a renegotiation with BNP Paribas of the current April 18 deadline to close the deal.

Rabo Securities analyst Cor Kluis said he saw no reason why BNP would not agree to move the deadline. However, he said later meetings might take place in a different economic climate.

“Half a year ago nobody wanted to keep the bank. In a month’s time that might be different … but if the market crashes, BNP may also think twice about whether it still wants to go ahead with the deal,” he said.

Rabo cut its rating for Fortis to hold from buy Wednesday, reflecting the added uncertainty.

Fortis reported a €28 billion ($37.245 billion) net loss for 2008 Tuesday on the state takeover of its troubled banking activities, but argued it had a viable future as an insurer.

(Additional reporting by Philip Blenkinsop and Marcin Grajewski in Brussels, Julien Ponthus, Matthieu Protard in Paris; Editing by Greg Mahlich and Andre Grenon)