14 March, 2010

France Bank Mergers & Acquisitions (Crédit Agricole)

Photo: Crédit Agricole is a major sponsor of the competitive cycling races. Seen here is crowd favourite Norwegian champion Thor Hushovd during stage 3 of the Amgen Tour of California competition in February 2007. Crédit Agricole’s stylized "CA" logos can be seen all over his team jersey.

With special thanks to Mike Norris for granting me the permission to use this photo. You can see more of Mike Norris' other photographs via this link: http://www.flickr.com/photos/mnorri/

Crédit Agricole S.A.

The present-day Crédit Agricole group can trace its history to three major financial institutions: the original Crédit Agricole group of agricultural credit unions, Banque Indosuez and Crédit Lyonnais.

Banque Indosuez (Banque de l’Indochine and Banque de Suez et de l’Union des Mines)

Banque de l’Indochine was established in Paris in 1875 to issue banknotes and to provide banking services in Indochina (Vietnam, then a French colony). From its Saigon (Ho Chi Minh City) base, the bank opened branches in Haiphong in 1885 and Hanoi in 1887. In China, the bank opened branches in Canton (Guangzhou), Shanghai, Tientsin (Tianjin) and Peking (Beijing) during the 1890s and 1900s, where the bank financed French-owned infrastructures, underwrote Imperial China’s sovereign debts, as well as provided trade financing. The bank began operating in Hong Kong in 1894 and Singapore in 1905, and also operated in other parts of Southeast Asia such as Thailand.

Outside of the Far East, the Banque de l’Indochine operated in Tahiti and New Caledonia, both French territories in the Pacific, as well as in French Somaliland (present-day Djibouti).

The Compagnie universelle du canal maritime de Suez was created in 1858 to build a maritime passage in Egypt to link the Mediterranean Sea with the Red Sea. The 160-km Suez Canal opened for business in 1869, greatly shortening the voyage between Europe and the Indian Ocean. In 1875, Egypt sold its 44% stake in the canal to Britain following an economic and fiscal crisis.

In 1956, a political crisis over the sovereignty and control of the Suez Canal led to its nationalization by Egypt. Having lost its investment in the canal, the Compagnie universelle du canal maritime de Suez transformed itself into the Compagnie Financière de Suez in 1958. A bank subsidiary was created by Suez one year later. In 1966, the Banque de la Compagnie Financière de Suez was renamed Banque de Suez et de l’Union des Mines.

In 1974, the Banque de l’Indochine and Banque de Suez et de l’Union des Mines merged to form the Banque de l’Indochine et de Suez, combining their Asian operations and corporate banking specialties together. The bank’s name was subsequently shortened to Banque Indosuez. Crédit Agricole acquired Banque Indosuez between 1995 and 1996.

Crédit Agricole

Crédit Agricole was created in 1894 by the French parliament to establish co-operative, agricultural credit unions to facilitate lending to small family farms. These private-sector co-operatives were created locally and owned mutually by their clients (members).

However, the mere creation of the agricultural credit unions failed to ease lending for the small farms. The credit unions were poorly-capitalized and the farmers often were too poor to make meaningful deposits to the banks, or lacked the appropriate collateral to obtain loans. Between 1898 and 1899, the French government requested the Banque de France to accept the discounted notes from Crédit Agricole’s credit unions, as well as to inject 40-million francs into the banks. Crédit Agricole then set up nine Caisses Régionales de Crédit Agricole Mutuel (the "regional banks") to co-ordinate and to manage the local credit unions.

In 1920, the Ministry of Agriculture created a national-level entity to act as the central, clearing bank for the caisses régionales and their local credit unions. In 1926, this public-sector entity was renamed the Caisse National de Crédit Agricole (CNCA). The credit unions provided loans to farmers, rural tradesmen, and during the 1920s and 1930s, financed the electrification of the French countryside. Throughout the Depression years, a number of agricultural credit unions encountered liquidity challenges and had to be bailed out by CNCA.

Following the end of World War II, Crédit Agricole opened thousands of new offices all over the French countryside and greatly expanded its retail deposit base. Gradually, Crédit Agricole's funding source moved away from the French state and became self-reliant. In 1959, for the first time the credit unions were allowed by the government to offer mortgage loans to all rural customers, regardless of their membership status in the co-operatives. It was only in 1991, however, when the last restrictions on Crédit Agricole's permitted activities (in terms of the ability to deal with both personal and corporate clients) were eliminated.

During the 1960s, in preparation for the creation of the Common Market (the predecessor of the European Union), the bank implemented a modernization plan in such aspects as management, corporate governance, as well as product lines. Crédit Agricole was finally given financial autonomy in 1966, and deposits were no longer required to pass through the French Treasury. CNCA was now solely responsible for the profits and losses of the caisses régionales.

In 1988, umbrella entity CNCA became a joint-stock company and was semi-demutualized (but not floated on the stock market). Ninety percent of CNCA’s shares were distributed to the caisses régionales in proportion to their total assets, with the rest of the shares distributed to the banks’ then and former employees. However, as the caisses régionales were still mutually-owned by their members, the CNCA group had a complex corporate structure where the umbrella entity was a joint-stock company owned and controlled by its subsidiaries, which were in turn mutually-owned by the members. At this point, CNCA still did not own any of the caisses régionales or the local credit unions that carried out the bulk of the business.

In 2001, CNCA was re-named Crédit Agricole S.A. (CASA) and acquired 25% stakes in 38 of the 39 caisses régionales and the more than 2,000 local credit unions. At the same time, the caisses régionales sold part of their holdings in Crédit Agricole S.A. on the Paris stock exchange. With these manoeuvres, the mutually-owned caisses régionales and Crédit Agricole S.A. now cross-held each other. As of 2009, Crédit Agricole S.A. controlled 25% of 38 of the 39 caisses régionales, as well as all of Le Crédit Lyonnais. The caisses régionales in turn collectively held 55% of Crédit Agricole S.A., with the remaining 45% of Crédit Agricole S.A. shares in free float.

Crédit Lyonnais (Le Crédit Lyonnais)

Situated in southeastern France, Lyon was a major commercial centre during the Renaissance and its trade fairs were well-known across Europe. In the 18th and 19th centuries, Lyon’s businessmen turned the city into an important banking and silk-trading and manufacturing centre.

Crédit Lyonnais was established in 1863 as a deposit bank for the local businesses. In 1870, the bank moved some of its securities and physical assets to London for safekeeping due to the Franco-Prussian War, the London office became the bank’s first foreign branch. During the 1870s, the bank expanded rapidly in southeastern France as well as in Paris. By 1900, the bank had a network of 200 branches in France, and 20 overseas offices in Constantinople (Istanbul), Alexandria, Geneva, Madrid, Vienna, St. Petersburg and Moscow. In 1887, when Bismarck forced the German banks to curtail their lending to Russia, French banks, including Crédit Lyonnais, took over a large percentage of Russia’s foreign borrowing.

By the turn of the 20th century, Crédit Lyonnais had become the world’s largest bank in terms of assets. However, World War I changed everything for the bank. After the 1917 revolution, the Bolsheviks confiscated all foreign businesses in Russia, and refused to honour Russia’s debt incurred during the Tsarist era. France’s losses in Russia is said to have been USD $4-billion.

Crédit Lyonnais suffered, but survived, the difficult inter-war years and World War II. In 1946, however, the freshly-liberated France decided to nationalize the Banque de France, plus the country’s four largest commercial banks, including Crédit Lyonnais.

Under state control, ambitious overseas expansion began in the 1970s in Europe, Asia and the U.S. During the 1980s, French politics swung between socialist and right-wing ideology, and the privatization of Crédit Lyonnais was debated but did not materialize.

In the 1990s, however, a series of corporate scandals hit Crédit Lyonnais; the most infamous one involved the bank’s Dutch unit lending USD $1-billion to Giancarlo Parretti to take over Metro-Goldwyn-Mayer in 1990. MGM went bankrupt almost right away, causing a huge loss at the bank. The bank also suffered enormous losses from bad loans made to Olympia & York and other real estate developers. In 1995, Crédit Lyonnais sold its Brazilian unit Banco Francês e Brasileiro (BFB) to Banco Itaú (now Itaú Unibanco).

After a series of state-imposed reforms, Crédit Lyonnais was floated on the Paris stock exchange in 1999. In 2003, the bank was taken over by Crédit Agricole.

Recent transaction(s):

  • In July 1995, Crédit Agricole acquired 51% of Banque Indosuez from the Suez group for FFr 6.3-billion. In December 1996, Crédit Agricole bought the remaining 49% of Banque Indosuez for FFr 5.6-billion. The entire Banque Indosuez cost about USD $2.2-billion. Crédit Agricole’s investment banking and capital market operations were combined with those of Banque Indosuez to form Crédit Agricole Indosuez.
  • In 2001, Crédit Agricole bought 81% of Poland's Lukas S.A. and Lukas Bank. Lukas Bank had about 100 branches in the country.
  • Crédit Agricole first took a 10% stake in fellow French bank Crédit Lyonnais in 1999 when the latter was privatized. By 2002, both BNP Paribas and Crédit Agricole were actively buying up shares of Crédit Lyonnais in an attempt to gain control. Crédit Agricole, then holding a 17.4% of Crédit Lyonnais, offered Eur 16.0-billion (USD $16.5-billion) for the 82.6% shares it didn't yet own, and eventually received approval from the French government in 2003 to acquire all of Crédit Lyonnais. The French government was said to favour Crédit Agricole's offer over BNP Paribas' proposal because the government was still upset by BNP's very public and hostile takeover battle with Société Générale for Paribas in 2000. Crédit Lyonnais was subsequently re-branded as Le Crédit Lyonnais (LCL).
  • In 2004, Crédit Agricole merged Crédit Agricole Indosuez with Crédit Lyonnais' investment banking division to form a new company named Calyon, combining the CA initials with the “lyon” part of Crédit Lyonnais. In 2010, Calyon was renamed Crédit Agricole Corporate & Investment Bank.
  • In 2005, Crédit Agricole bought 71% of Serbia’s Meridian Bank AD.
  • In 2006, the bank bought in 50/50 partnership with Portugal's Banco Espirito Santo life insurer Tranqulidade Vida for Eur 900-million.
  • In 2006, the bank acquired JSC Index Bank of Ukraine for USH 1.33-billion (Eur 220-million). JSC Index had more than 200 offices in the country.
  • In 2006, Crédit Agricole made an offer to acquire all outstanding shares of Greece’s Emporiki Bank for Eur 25 per share. The offer valued the entire Greek bank at Eur 3.3-billion. Emporiki had 370 branches in Greece and dozens more in the Balkans. Crédit Agricole eventually gained about 72% of the bank.
  • In 2006, Banca Intesa agreed to sell 652 branches in northern Italy to Crédit Agricole for Eur 6.0-billion (USD $7.52-billion) as compensation for the French bank's loss of influence over Banca Intesa. Crédit Agricole's 18% stake in Banca Intesa would be diluted to just about 10% after the Intesa-Sanpaolo IMI merger. As Crédit Agricole was determined to maintain a significant presence in Italy, it agreed to support Banca Intesa's purchase of Sanpaolo IMI in exchange for some Italian branches and clients.
  • In 2006, Crédit Agricole approached British mortgage bank Alliance & Leicester for a possible acquisition. Rumours at the time suggested that Crédit Agricole offered GBP 5.2-billion to 5.8-billion for Alliance & Leicester. However, the British bank spurned the offer and the French bank walked away. Just merely two years later, Alliance & Leicester was in such financial distress during the global credit crisis that it accepted a much lower GBP 1.26-billion offer from Spanish bank Banco Santander in July 2008.
  • In 2007, the bank acquired a 19.53% stake in Spain's Bankinter SA for Eur 809-million (USD $1.20-billion). Bankinter was founded in 1965 by Banco Santander and Bank of America as an industrial bank. Bankinter gained independence from the two founding banks in 1972 when it was listed on the Madrid stock exchange. Bankinter has since expanded into the retail banking sector and had a network of 347 branches. However, some analysts criticised the high price Crédit Agricole paid for Bankinter.
  • In July 2008, Crédit Agricole raised Eur 5.9-billion from the market by issuing preferred securities.
  • In October 2008, the French government injected Eur 10.5-billion to the banking system in the form of subordinated debt during the global credit crisis. Banque Populaire obtained Eur 950-million from the state; BNP Paribas obtained Eur 2.55-billion; Caisse d'Epargne obtained Eur 1.1-billion, Crédit Agricole obtained Eur 3-billion; Crédit Mutuel obtained Eur 1.2-billion; Société Générale obtained Eur 1.7-billion.
  • In early 2009, Crédit Agricole and rival Société Générale agreed to merge their asset management operations into a new firm called Amundi Asset Management. Crédit Agricole would own 75% of Amundi and Société Générale would own the rest. Amundi would have Eur 638-billion (USD $827-billion) under management and would become the fourth biggest manager in Europe. The two French banks agreed to maintain their stake for five years, but planned to launch an IPO eventually.
  • In October 2009, Crédit Agricole repaid the Eur 3-billion (USD $4.46-billion) in state aid it received from the French government.
  • In July 2012, Crédit Agricole sold a 19.9% stake in Hong Kong-based investment bank CLSA (formerly Credit Lyonnais Securities (Asia)) to China's largest brokerage CITIC Securities Co. for USD $310-million (Eur 253-million). CITIC Securities also gained the exclusive right to buy the remaining 80.1% of CLSA.
  • In October 2012, Crédit Agricole sold its Greek subsidiary Emporiki Bank to Alpha Bank for practically nothing (Eur 1, USD $1.31).  Furthermore, Crédit Agricole had to inject Eur 550-million into Emporiki, maintain a Eur 1.4-billion credit line to Emporiki for three years, and subscribe to Eur 150-million of Alpha Bank's convertible bonds as part of the sale agreement.  The French bank had to pay Alpha to take over Emporiki as the Greek sovereign debt crisis can potentially expose Crédit Agricole to losses much higher than the amount it's costing to get rid of the risk. Emporiki operated about 370 branches in Greece.
  • In July 2013, Crédit Agricole sold its remaining 80.1% stake in Hong Kong-based investment bank CLSA to China's CITIC Securities Co. Ltd. for USD $842-million.
  • In January 2014, Crédit Agricole agreed to sell its Bulgarian operations to Corporate Commercial Bank AD.
  • Between January and September 2013, Crédit Agricole sold its entire 19.53% stake in Spain's Bankinter SA at a loss.
  • In May 2014, Crédit Agricole sold its 50% stake in brokerage firm Newedge Group to Société Générale (SocGen) for EUR 275-million. SocGen already owned 50% of Newedge and would now become its sole parent. At the same time, SocGen sold a 5% stake of asset manager Amundi to Crédit Agricole for EUR 337.5-million. Following the transaction, Crédit Agricole would own 80% of Amundi and SocGen would own 20%.
  • In August 2014, Crédit Agricole wrote off its stake in Portugal's Banco Espitiro Santo SA (BES) to zero, suffering a loss of EUR 708-million. Crédit Agricole's investment in BES dates back to 1991, when the French bank partnered with the Espirito Santo Financial Group to form the BESPAR – Sociedade Gestora de Participações Sociais, S.A. to privatize and float the formerly state-owned BES.
  • In May 2015, Crédit Agricole sold its Albanian operations to Tranzit Sh.p.k., subsidiary of NCH Capital Inc.
  • In November 2015, Crédit Agricole and Société Générale (SocGen) agreed to float their jointly-owned asset manager Amundi on the Paris Stock Exchange. The majority of the public float came from SocGen, which sold its entire 20% stake in Amundi for EUR 1.5-billion (USD $1.6-billion). Meanwhile, Crédit Agricole sold a 2.3% stake in Amundi in an over-allotment for EUR 170-million, and another 2.0% stake to the Agricultural Bank of China for EUR 150-million.
  • In February 2016, Crédit Agricole simplified its corporate structure and eliminated its parent-subsidiary cross-holding framework when parent company Crédit Agricole S.A (CASA) sold its 25% holdings in the 39 subsidiary mutual banks back to the mutuals for EUR 18.0-billion (USD $20.05-billion). Following the transaction, the 39 mutual banks would continue to collectively own 56% of the listed CASA, but CASA would no longer have any stake in any of the mutual banks under the Crédit Agricole banner
  • In December 2016, Crédit Agricole's majority-owned asset manager Amundi agreed to buy UniCredit's Pioneer Investments for EUR 3.545-billion (USD $3.72-billion) in cash. Adding Pioneer's EUR 222-billion of assets under management will raise Amundi's total to EUR 1,276-billion (or 1.276-trillion), making it the 8th largest asset manager in the world. Amundi will finance part of the purchase with a rights issue, which Crédit Agricole has agreed to subscribe in order to maintain a minimum of 66.7% stake in Amundi.
  • In September 2017, Crédit Agricole sold a 16.2% stake in its Saudi Arabian associate bank Banque Saudi Fransi (BSF) to Saudi conglomerate Kingdom Holding Company for EUR 1.3-billion (SAR 5.8-billion). Following the sale, Crédit Agricole's stake in BSF would be reduced to 14.9%.
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