21 August, 2009

France Bank Mergers & Acquisitions (Société Générale)

Photo: One of Société Générale's London offices near the Tower of London. Photo was taken during my trip to London in 2007.

Société Générale S.A.
(Also known as SOCIETE GENERALE, SocGen)

Société Générale was established in 1864 by an imperial decree signed by Napoleon III. Its full name at the time was Société Générale pour Favoriser le Développement du Commerce et de l'Industrie en France. As the name suggests, the bank’s mandate was to promote large, long-term commercial and industrial development.

At the end of World War II, Société Générale, along with Crédit Lyonnais, Comptoir National d'Escompte and Banque Nationale pour le Commerce et l'Industrie were nationalized in 1945 by the French government to stabilize the fiscal and monetary systems. In 1987, SocGen (as it's often referred to as) became the first of the Big Three banks to be floated on the stock market.

In March 1999, SocGen entered into an agreement to merge with investment bank Paribas S.A. in a Eur 17.0-billion (USD $17.7-billion) transaction. However, Banque Nationale de Paris (BNP) also aspired to expand and soon made a hostile Eur 19.8-billion (USD $21.o-billion) counter-offer for Paribas, and a separate Eur 18.5-billion (USD 19.6-billion) offer for Société Générale itself. Had BNP succeeded, the three-way merger would have created the world's then biggest bank with assets of over USD $1-trillion.

In June 1999, Société Générale raised its offer for Paribas to Eur 20.3-billion (USD $21.1-billion). Meanwhile, the uncertainties about the messy bidding war resulted in a drop in BNP's share prices, lowering the combined value of its offer for Paribas and SocGen to Eur 36.0-billion (USD $37.9-billion). For months, all three banks engaged in a public relations battle in an attempt to win support from the public, shareholders and the French government. In the end, BNP succeeded in breaking SocGen and Paribas' merger proposal, and acquired Paribas to form BNP Paribas S.A. However, it could only secure 31.5% of SocGen's shares. Following a court battle, the French banking regulator ruled that BNP's stake in Société Générale was below the controlling threshold. Furthermore, BNP was instructed to give up its stake in SocGen, essentially vetoing BNP's three-way merger plan.

In recent years, Société Générale has been focusing on the Central and Eastern European (CEE) market.

Recent transaction(s):

  • In 1999, Société Générale (SocGen) bought 97.95% of Bulgaria's Expressbank AD.
  • In 2001, SocGen acquired more than 96% of Slovenia's SKA Banka, d.d. SKA Banka was founded in 1978 as Stanovanjsko-Komunalna Banka, offering residential mortgages as well as financing municipal construction. As of 2007, SKB operated 57 branches in Slovenia.
  • In 2001, SocGen bought 60% of Komercni Banka from the Czech government for Euro 1.19-billion (USD $1.01-billion).
  • In 2003, SocGen bought 50.7% of Ghana's SSB Bank Ltd. SSB Bank is Ghana's No. 4 bank and operated 38 branches.
  • In 2003, SocGen bought Banca Romana pentru Dezvoltare (BRD) of Romania.
  • In 2004, bought 50.17% of the General Bank of Greece (GBG) from the Greek Army Pension Fund. Following the purchase, GBG was renamed Geniki Bank.
  • Also in 2004, SocGen acquired 75% of Hamburg-based Hanseatic Bank from the Otto Group for EUR 190-million.  Hanseatic is a small German bank offering deposit and real-estate loan products.
  • In 2005, SocGenbought 64.4% of Montenegro's Podgoricka Banka for Eur 14.2-million. Podgoricka Banka had 19 branches in the former Yugoslav nation.
  • Also in 2005, SocGen offered Eur 345-million (USD $420-million) for Egypt's Misr International Bank (MiBank). Shareholders owning 69.7% of Misr International had agreed to tender to Société Générale's offer.
  • In 2006, SocGen bought Croatia’s HVB Splitska Banka for HRK 7.29-billion (Eur 1.0-billion) from Italy’s UniCredit SpA, which was forced to sell HVB Splitska because UniCredit's takeover of Germany's HVB Group had given the combined bank more than the 10% market-share ceiling permitted in Croatia. HVB Splitska Banka operated 112 branches in Croatia.
  • In 2006, SocGen bought, in two stages, a total of 20% of Russia's Rosbank for USD $634-million.
  • In 2007, SocGen's brokerage unit Fimat merged with Crédit Agricole's Calyon's brokerage unit Calyon Financial. The new entity was named Newedge and became a 50/50 joint-venture of SocGen and Crédit Agricole’s Calyon.
  • In 2007, SocGen bought 70.57% of Moldova's BC Mobiasbanca for MDL 303-million (Eur 18-million, USD $24-million).
  • In 2007, SocGen bought Brazil's consumer finance bank Banco Cacique for BRL 850-million (Eur 309-million, USD $407-million). Banco Cacique had a network of 190 branches, 900,000 individual clients and 350,000 active credit cards.
  • In January 2008, SocGen discovered that its “rogue” trader Jérôme Kerviel had amassed unauthorized trading positions totalling Eur 50-billion (USD $74.5-billion). The bank immediately and secretly unwound its exposure by selling Eur 18-billion worth of DAX index futures, Eur 30-billion of the DJ Euro Stoxx 50 futures and Eur 2-billion of FTSE 100 futures. SocGen’s sale of these index futures was said to have deepened the global market rout on 2008-01-22. Following the unwinding, SocGen disclosed that it had lost Eur 4.9-billion (USD $7.2-billion) from Kerviel’s trades. In order to restore the depleted capital, SocGen raised Eur 5.5-billion (USD $8.44-billion) from a rights issue in March.
  • Also in 2008, SocGen bought Capitalia’s securities services business from Italy’s UniCredit for Eur 195-million. The unit purchased had Eur 102-billion of assets under custody and another Eur 27-billion under administration.
  • In 2008, SocGen indicated that it would exercise its call option to acquire another 30% of Russia's Rosbank for USD $1.7-billion. The exercise of this option would trigger a mandatory offer to current minority shareholders that will lead to an increase of SocGen's stake in Rosbank to 57.8%. Rosbank served 3 million individual clients, 60,000 small- to medium-size enterprise accounts and 7,000 corporate clients through 600 branches.
  • Also in 2008, SocGen bought Ikar Bank of Ukraine, which specialized in consumer finance through 14 branches.
  • In 2008, SocGen bought 15% of South-East Asia Bank (SeA Bank), a small Vietnamese bank with 55 branches.
  • In early 2009, Crédit Agricole and fellow French bank Société Générale agreed to merge their asset management operations. Crédit Agricole would own 75% of the combined entity and Société Générale would own the rest. The new entity would have Eur 591-billion (USD $766-billion) under management and would be the fourth biggest in Europe. The new firm, originally known as CAAM-SGAM, was later renamed Amundi Asset Management and said to be worth about Eur 6-billion according to SocGen’s own estimates. The two French banks agreed to maintain their stakes for five years, but planned to launch an IPO and sell part of stake to the public in the future.
  • Between November 2008 and May 2009, the French government subscribed to a total of Eur 3.4-billion of SocGen securities as part of the French Economic Support Plan.
  • In October 2009, SocGen raised Eur 4.8-billion (USD $7-billion) in a rights issue. The bank planned to use Eur 3.4-billion (USD $5-billion) to repay state aid and the rest to make acquisitions and boost capital strength.
  • In August 2012, SocGen sold its Los Angeles-based majority-owned asset manager TCW Group Inc. to an investor group led by Carlyle Group LP. The deal valued all of TCW at between USD $700-million and $800-million.  TCW managed USD $131-billion of assets.
  • In October 2012, SocGen sold its loss-making Greek subsidiary Geniki Bank to Piraeus Bank for practically nothing (Eur 1-million, USD $1.31-million).  Furthermore, SocGen had to inject Eur 281-million into Geniki and subscribe to Eur 163-million of Piraeus Bank's convertible bonds as part of the sale agreement.  SocGen had to literally pay Piraeus to take over Geniki as the Greek sovereign debt crisis can potentially expose SocGen to losses much higher than the Eur 444-million it's costing to get rid of the Greek subsidiary. Geniki operated about 140 branches in Greece.
  • In December 2012, SocGen sold its 77.2% stake in Cairo-based National Société Générale Bank SAE (NSGB) for USD $1.97-billion (Eur 1.50-billion) to Qatar National Bank SAQ.  National Société Générale Bank served 700,000 clients through 160 branches in Egypt.
  • In November 2013, SocGen bought the 50% of brokerage firm Newedge Group that it didn't already own from partner Crédit Agricole for Eur 275-million, meanwhile, it sold a 5% stake in asset manager Amundi to Crédit Agricole for Eur 337.5-million. Following the transactions, SocGen would own all of Newedge Group and 20% of Amundi.
  • In March 2014, SocGen sold its Asian private banking business to Singapore's DBS for USD $220-million (Eur 158-million). The business sold had USD $12.6-billion of assets under management.
  • In May 2014, SocGen wrote down its Russian retail subsidiary Rosbank's value by Eur 525-million (USD $731-million). Tension between the West and Russia has been high since the geopolitical crisis between Ukraine and Russia led to an exodus of capital from Russia, as well as a sharp drop of the Russian rouble and stock market.
  • In November 2015, SocGen sold its entire 20% stake in Amundi Asset Management in an IPO for EUR 1.5-billion (USD $1.6-billion). Amundi was listed on the Paris Stock Exchange.
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