03 August, 2009

Belgium Bank Mergers & Acquisitions (Dexia, KBC Groupe/ Groep)



Photo: During December 2006 and January 2007, the Dexia Tower in downtown Brussels was transformed into an interactive piece of artwork with an LED lighting system on the building's exterior walls. A control panel located a short distance away from the building allowed the public to create animated graphics by changing the patterns and colours of the 4,200 LED lights.

With special thanks to Belgian Internet graphic designer Lander Janssens for allowing me to use his photo. You can contact Lander Janssens via the following links:

http://www.flickr.com/people/grapplica/
http://www.grapplica.be/



Dexia S.A.

Belgium's strong historic ties to the Netherlands and France are reflected in its banking sector. In 1815, the Low Countries gained independence from France and became the United Kingdom of the Netherlands. However, the French-speaking Catholics resented Dutch rule and seceded from the Netherlands merely 15 years later in 1830, establishing Belgium. If bancassurance giant Fortis is a representation of the Belgo-Dutch connection, then Dexia is its Belgo-French counterpart.


Artesia Banking Corporation (BACOB-ARCO, DVV)

Artesia’s banking and insurance holdings in Belgium can trace its origins to Algemeen Christelijk Werknemersverbond (General Confederation of Christian Workers, or ACW), which itself dates back to the late 19th century. During the 1920s and 1930s, various mutual insurers and banking co-operatives were created under the ACW, including insurer De Volksverzekering (DVV) in 1929 and savings bank Landelijk Verbond van Christelijke Coöperaties (LVCC) in 1935. DVV and other banking co-operatives, including Belgische Arbeiderscoöperatie (BAC-Centrale Depositokas, founded in 1924) were soon placed under the umbrella of LVCC.

In 1990, LVCC were re-orgnanized and renamed Arcofin CV, as a subsidiary of parent company Groep/ Groupe ARCO. Meanwhile, BAC-Centrale Depositokas (within Arcofin) in 1993 adopted the new name BACOB Bank.

In 1997, the BACOB-ARCO (new name for Arcofin and BACOB Bank) group bought a majority stake of Banque Paribas Belgique and Banque Paribas Nederland from France’s Paribas SA, which was exiting its Belgian, Dutch and French retail banking business. In 1999, BACOB-ARCO was restructured and became known as Artesia Banking Corporation, consisting of BACOB Bank and DVV the insurer.


Crédit Communal de Belgique

In 1860, the Crédit Communal de Belgique was created to offer public-sector financing to municipal governments in Belgium. Crédit Communal was mutually owned by the municipalities that borrowed from the bank. In 1947, Crédit Communal was transformed into a retail bank when a branch network was developed and savings accounts were offered to individual clients. The Belgian bank expanded to Luxembourg in 1990 specializing in asset management. In 1991, Crédit Communal acquired a 25% stake in Banque Internationale à Luxembourg (BIL). By 1992, the investment in BIL was increased to 51%.

Crédit Local de France

In 1947, the Crédit Local de France was established to replace the old Caisse d'aide à l'équipement des collectivités locales (CAECL) to administer financing requirements at the local governmental level. In 1990, the bank opened an office in New York. In 1991, Crédit Local de France went public when 49.5% of its shares was offered to French and foreign investors. The French government and Caisse de dépôts continued to hold the remaining 50.5%. In 1993, the French government and Caisse de dépôts further reduced its holding in CLF to 20% when more shares were sold to the public.

Recent transaction(s):

  • In 1996, Crédit Communal de Belgique and Crédit Local de France merged to form Dexia. Under the Dexia umbrella, Dexia France was listed on the Paris stock exchange and Dexia Belgium was listed on the Brussels stock exchange. Under a complex structure, Dexia France and Dexia Belgium both owned half of their own local operations and half of the counterpart’s operations.
  • In 1999, Dexia Belgium took over Dexia France's operations under a restructuring scheme. Dexia's original two-headed structure had proven to be restricting and complicated to manage and operate. The new holding company became known as Dexia SA.
  • Also in 1999, Dexia acquired a 20% stake in Crédit du Nord, a French retail bank, from Société Générale for USD $372-million. Dexia eventually sold the stake back to the French banking giant in late 2009.
  • Also in 1999, Dexia acquired another 39% of Banque Internationale à Luxembourg that it did not already owned.
  • In 2000, Dexia bought Financial Security Assurance Holdings Ltd. (FSA) of the United States for USD $2.6-billion, further strengthening Dexia's expertise in public-sector financing. Financial Security Assurance was a specialist in underwriting municipal bonds in the U.S.
  • In 2001, Dexia bought Artesia Banking Corp. in Belgium for Eur 3.0-billion (USD $3.3-billion) from Groep/ Groupe ARCO. The purchase mainly included BACOB Bank and DVV insurance. With this purchase, Dexia became the No. 2 bancassurance in Belgium. The all-stock deal gave seller Groep/ Groupe ARCO a significant minority stake in Dexia SA.
  • In 2003, Dexia further increased Banque Internationale à Luxembourg (BIL)’s stake to almost 100%.
  • In 2006, Dexia acquired 75% of Turkey's DenizBank AS from Zorlu Holding for Eur 1.89-billion (TRY 3.78-billion, USD $2.44-billion). Dexia also launched a general offer for the remaining 25% of DenizBank. The general tender offer, if successful, would give Dexia 100% control of the Turkish bank, and bring the value of the entire transaction to Eur 2.52-billion (TRY 5.04-billion, USD $3.25-billion).
  • Dexia was caught up in the global Banking Crisis in 2008. As financial institutions collapsed around the world, banks became increasingly unwilling to lend to each other, resulting in a sharp rise in the Libor rates (London Inter-bank Borrowing Rates). Banks that were weakly-capitalized, including Dexia, experienced massive withdrawal of deposits from their clients, causing more stress to their capital base just when they needed more capital. On 2008-09-30, Belgium, France and Luxembourg jointly re-capitalized Dexia by injecting Eur 6.376-billion (USD $9.0-billion) into the bank. Multiple levels of governments in Belgium subscribed to Eur 3-billion in new Dexia stock, a move that was repeated by the French government. Meanwhile, the Luxembourg government bought Eur 376-million of Dexia convertible bonds.
  • In 2008, Dexia sold its bond insurance business to Assured Guaranty Ltd. for Eur 816-million (USD $1.02-billion). Dexia would receive Eur 546-million in cash and 21.85-million new shares of Assured Guaranty Ltd. The disposition of Financial Security Assurance’s insured portfolio of USD $415-billion (including USD $113-billion of asset-backed securities) significantly reduced Dexia’s exposure to the U.S. monoline industry. Dexia would own 13.9% of the Assured Guaranty Ltd. after the transaction.
  • In December 2008, Belgium, France and Luxembourg once again came to the rescue of Dexia by jointly guaranteeing up to Eur 150-billion (USD $225-billion) of the bank’s interbank deposits and financing. The Belgian state’s maximum commitment was Eur 90.75-billion, the French state’s maximum commitment was Eur 54.75-billion and the Luxembourg state, Eur 4.5-billion. The guarantees would expire at the end of October 2011.
  • In December 2009, Dexia sold back the 20% stake in Crédit du Nord as well as a small asset management firm to Société Générale for Eur 676-million (USD $994-million). Dexia originally acquired the Crédit du Nord stake from Société Générale in 1999.
  • In October 2011, Dexia nearly collapsed under the weight of significant markdowns in the value of its Greek, Italian sovereign debt and U.S. municipal bonds holdings. As Dexia's capital depleted from the losses, other banks became reluctant to lend to and deal with it and the bank had to be rescued by Belgium, France and Luxembourg for the third time in three years. Under the plan, Belgium paid Dexia S.A. Eur 4.0-billion (USD $5.4-billion) to acquire and nationalize Dexia Bank Belgium. Belgium, France and Luxembourg then agreed to offer an additional Eur 90-billion (USD $121.5-billion) in funding guarantees to Dexia for up to 10 years to prevent Dexia from defaulting. Belgium committed to 60.5% of the guarantees, France committed to 36.5% and Luxembourg, the remaining 3%. At the same time, Dexia put its Luxembourg subsidiary Dexia BIL up for sale.
  • Following the sale of Dexia Bank Belgium to the Belgian state, Dexia no longer has any meaningful operations in Belgium. Dexia Bank Belgium was renamed Belfius Banque & Assurances in 2012.
  • In April 2012, Dexia Group finalized the sale of Luxembourg-based Dexia BIL to Qatari investment group Precision Capital and the State of the Grand Duchy of Luxembourg for Eur 730-million (USD $953-million). Precision Capital would acquire a 90% stake and the Luxembourg state would acquire the remaining 10%. Dexia BIL was then renamed Banque Internationale à Luxembourg.
  • Also in April 2012, Dexia sold its 50% share in RBC Dexia to co-owner the Royal Bank of Canada for CAD $1.1-billion (USD $1.1-billion, Eur 847-million). Interestingly, the press release from the Royal Bank of Canada claimed that the seller was Banque Internationale à Luxembourg (BIL), but an earlier press release from BIL clearly stated that it did not own any stake in RBC Dexia.
  • Also in 2012, Dexia sold Turkey's DenizBank to Russia's Sberbank for TRY 6.47-billion (EUR 2.82-billion, USD $3.50-billion). DenizBank had 592 branches in Turkey and 15 outside.


KBC Groupe/ Groep NV

In 1998, three Belgian banks and insurance companies, Kredietbank, ABB-verzekeringen (ABB-insurance) and CERA Bank, merged to form KBC Bank and Insurance Holding Co. In 2005, KBC Bank & Insurance merged with its parent company Almanij of Belgium and changed its name to KBC Groep NV.

Recent transaction(s):
  • In 1996, the predecessor of KBC acquired a 5% stake in Poland's Kredyt Bank. The holding in the Polish bank was gradually increased to 85% by 2004.
  • Between 1997, when Hungary's K&H Bank was privatised, and 2000, KBC acquired the entire capital of K&H.
  • In 2001, KBC's Hungarian banking unit K&H Bank merged with ABN AMRO Holding's ABN-AMRO Magyar. KBC's stake in K&H was diluted to 59%, but the merger made K&H the No. 2 bank in Hungary.
  • In 2005, KBC once again became the sole owner of Hungary's K&H Bank.
  • In 2006, KBC's stake in Kredyt Bank of Poland decreased to 80% in order to comply with local banking regulations.
  • In 2009, the Flemish regional government of Belgium subscribed to Eur 3.5-billion of non-dilutive KBC securities to replenish the bank’s capital level.
  • In 2010, KBC agreed to sell its KBL European Private Bankers (KBL epb) to India's Hinduja Group for Eur 1.35-billion (USD $1.9-billion). The sale was part of the restructuring of KBC required by the European Commission in order for the bank to receive state aid. However, the sale failed to win regulatory approval from Luxembourg and was cancelled in March 2011. Britain was also rumoured to be opposed to the sale to Hinduja.
  • In October 2011, KBC agreed to sell its Luxembourg-based KBL epb to Qatari investment fund Precison Capital for Eur 1.05-billion (USD $1.42-billion). Qatar's royal family al-Thani is believed to be a major owner of Precision Capital.

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