Unfortunate Victors: The Doomed Battle for ABN AMRO

Photo: Royal Bank of Scotland, Fortis and Banco Santander acquired ABN AMRO Holding for Eur 70.0-billion (USD $101.0-billion) in November 2007, marking it the largest banking acquisition in history up to that point. Ironically, barely one year following their massive acquisition, the Royal Bank of Scotland and Fortis went de facto bankrupt during the credit crisis and were nationalized by Britain (RBS) and Belgium and Luxembourg (Fortis). Meanwhile, the Dutch state bought ABN AMRO's Dutch operations from the bankrupt Fortis, returning the bank to Dutch control.

Children's Money, Adult's Battle

To the Dutch business world, 2007 was a dramatic year that saw the sale of ABN AMRO Holding NV. For several years, ABN AMRO’s management had been questioned for their mediocre management and poor profitability. Then in February 2007, British-based investment fund TCI (The Children’s Investment), holder of about 2% of ABN AMRO’s shares, openly criticized the bank’s management strategy and demanded the bank be sold or split up.

While publicly defending its long-term strategy during March, ABN AMRO held secret talks with British bank Barclays plc about a potential merger. On 2007-03-20, ABN AMRO and Barclays announced that they were in exclusive discussion about a potential combination. Speculation that a bidding war from other European and American banks would erupt lifted ABN AMRO's share prices from under Eur 30 to Eur 35 within days.

While the exclusive discussion between ABN AMRO and Barclays was still in progress, a banking consortium formed by the Royal Bank of Scotland Group (RBS), Belgium’s Fortis and Spain's Banco Santander on 2007-04-13 sent a letter to ABN AMRO’s board expressing their wish to acquire the Dutch bank. The banking consortium’s plans involved carving up ABN AMRO’s extensive global operations. RBS would take over ABN AMRO’s U.S. subsidiary LaSalle Bank, as well as ABN AMRO’s retail, commercial and investment banking businesses outside of Brazil, Italy and the Netherlands. RBS already had a sizable U.S. subsidiary named Citizens Financial. By acquiring Chicago-based LaSalle Bank, RBS could achieve greater synergy and efficiency in the U.S.

Meanwhile, Fortis planned to take over ABN AMRO’s home market in the Netherlands, as well as its global private banking and asset management divisions. Lastly, Banco Santander, which already operated extensively in Latin America, would take over ABN AMRO’s Brazilian operations Banco ABN AMRO Real, and expand into the high-growth Italian market by acquiring ABN AMRO’s Banca Antonveneta. With much more overlap in their existing markets, the tri-bank consortium could achieve much more cost savings and afford a higher price for ABN AMRO than Barclays.

The Dutch Central Bank, De Nederlandsche Bank (DNB), favouring a merger of equals between Barclays and ABN AMRO over the consortium’s break-up proposal, warned on 2007-04-18 of the risks and complications in “the preparation… the execution and implementation” of the [consortium’s] proposal. His comments, however, were immediately criticized by the European Commission that nationalist protectionism must not be used to discourage cross-border consolidation within the EU.

Barclays-ABN AMRO's Poison Pill

After a month of exclusive talks, Barclays and ABN AMRO jointly-announced on 2007-04-23 that they had agreed to an all-stock deal that valued ABN AMRO at Eur 67.0-billion (GBP 45.4-billion, USD $91.0-billion), making it the biggest banking merger ever. At the same time, ABN AMRO also announced that it had agreed to sell its U.S. operations LaSalle Bank (officially known as ABN AMRO North America Holding Co.) to Bank of America for USD $21.0-billion (Eur 15.46-billion) in cash. ABN AMRO’s surprise announcement to pre-emptively sell LaSalle Bank was clearly a “poison-pill” move to fend off the breakup proposal from RBS, Fortis and Santander. Without LaSalle Bank, the division most sought after by RBS, it was believed that consortium might disband itself.

Under the Barclays-ABN AMRO merger proposal, the new bank would retain the name Barclays plc, and have its head office in Amsterdam. Existing Barclays shareholders would end up owning 52% of the new bank, while the remaining 48% would be owned by the former ABN AMRO shareholders. About 12,800 jobs would be cut from the combined operations. Consolidation cost savings would amount to Eur 3.5-billion annually.

Furious Consortium Counter-offers

Understandably, RBS, Fortis and Santander were furious about ABN AMRO’s agreement to sell LaSalle Bank to Bank of America for USD $21.0-billion. British investment fund TCI and Dutch investor rights group VEB both demanded that the terms of the LaSalle Bank sale be made public, and a shareholders’ meeting be called to vote on the sale.

Barely two days following the Barclays offer, RBS, Fortis and Santander made an unsolicited, informal offer of Eur 72.2-billion (USD $98.5-billion) for ABN AMRO, triggering a dramatic takeover battle. The consortium’s offer consisted of 70% in cash and 30% in stock. However, the offer was conditional on ABN AMRO rescinding its agreement to sell LaSalle Bank. Analysts generally favoured the consortium’s offer, as it was higher than the one proposed by Barclays, and had a high cash component as opposed to Barclays’ all-stock offer, whose value had fallen to Eur 65.0-billion (USD $88.2-billion) due to a drop in Barclays’ share prices. When ABN AMRO’s management refused to let its shareholders vote on the sale of LaSalle Bank, shareholder rights group VEB launched a lawsuit against the Dutch bank.

Throughout April and May 2007, the market wildly speculated that HSBC, BNP Paribas, BBVA and JPMorgan Chase could also bid for ABN AMRO. There were also rumours that Société Générale and UniCredit were in merger talks with each other.

ABN AMRO’s uncertain future prompted some clients to pull their savings from the bank and others to express concerns. ABN AMRO’s employees and labour unions accused the shareholders of selling out one of Netherlands’ most important businesses, and urged the shareholders to put the future of Dutch jobs and the Dutch economy ahead of greed.

Meanwhile, Bank of America, eager to acquire LaSalle Bank from ABN AMRO, signalled that it would sue ABN AMRO should the LaSalle Bank sale agreement be rescinded, potentially triggering a lengthy and nasty legal battle across the Atlantic.

While all the parties waited for the Enterprise Chamber of the Amsterdam Court of Appeal’s ruling on the VEB lawsuit, ABN AMRO openly questioned how the consortium could come up with more than Eur 50.0-billion in cash to pay for the offer.

The Trans-Atlantic Lawsuits

On 2007-05-03, the Enterprise Chamber of the Amsterdam Court of Appeal ruled that ABN AMRO’s sale of LaSalle Bank to Bank of America was illegal, and that ABN AMRO must obtain shareholders’ approval before the sale could proceed. Within 24 hours of the Dutch court’s ruling, Bank of America filed a lawsuit in the U.S. District Court in Manhattan demanding ABN AMRO to go ahead with the sale.

At the same time, Dutch finance minister Wouter Wos also waded into the takeover drama by urging the RBS-Fortis-Santander consortium to clarify on their financing and breakup implementation plans.

Not backing down from the legal setback, Barclays and ABN AMRO filed an appeal on 2007-05-15 to the Dutch Supreme Court over the ruling that froze the sale of LaSalle Bank to Bank of America. Then two weeks later, RBS, Fortis and Santander officially presented their hostile Eur 71.1-billion offer for ABN AMRO.

The takeover battle went through a month of relative calm until 2007-06-25, when the most senior advisor to the Dutch Supreme Court, Attorney General Levinius Timmerman concluded that ABN AMRO’s sale of LaSalle Bank to Bank of America was legal, and should not be blocked. The Attorney General’s legal opinions, while not binding, have historically been highly regarded by the Supreme Court.

Barclays-ABN AMRO: 1 Consortium: 0

On 2007-07-13, as expected, the Dutch Supreme Court cleared ABN’s sale of LaSalle Bank to Bank of America. Analysts began to wonder if the setback would cause RBS to pull out of the consortium. By now, however, a further drop in Barclays’ share prices meant that its offer has fallen in value to Eur 63.7-billion (USD $87.6-billion).

Despite the failure to secure LaSalle Bank, the RBS-Fortis-Santander consortium not only pressed on with the offer, but on 2007-07-16 raised the cash component of their offer from 70% to 93.5%, with the rest payable in Royal Bank of Scotland shares. This meant that the consortium now needed to come up with Eur 65.7-billion (USD $90.4-billion) in cash to buy ABN AMRO.

Barclays Gets Hot Money from Asia

Barclays, refusing to back down from the battle, also worked behind the scene to look for ways to raise its offer. Exactly one week after the consortium raised their cash portion of the offer, Barclays raised GBP 2.44-billion (Eur 3.6-billion, USD $4.97-billion) in cash by issuing a 3.1% stake to China Development Bank and a 2.0% stake to Singapore’s sovereign fund Temasek Holdings. Barclays would use the proceeds to buy back its own shares to support its share price. Should the bid for ABN AMRO succeed, China Development Bank had committed to invest another GBP 3.64-billion worth of Barclays shares, whereas Temasek had committed to invest another GBP 499-million worth of Barclays shares.

Armed with this freshly-injected GBP 2.44-billion cash, Barclays raised its offer for ABN AMRO to Eur 67.5-billion (USD $93.1-billion) and added a cash component to it: the new offer was 37% in cash and 63% in Barclays’ shares. Barclays’ new offer was still 5% below that from the tri-bank consortium, but the bank was betting that its share buyback programme would prompt investors to bid up its share prices. It was also hoping that ABN AMRO’s shareholders might favour the friendly merger deal over the uncertainties surrounding the consortium’s offer.
However, Barclays’ new offer failed to ignite investor enthusiasm and the value of its offer continued to linger around Eur 66.0-billion rather than catch up to the consortium’s Eur 72.0-billion.

Consortium Seeks Eur 65.7-Billion, in Cash

In late July, there were doubts over whether Fortis, the smallest member in the consortium, could raise the Eur 24.0-billion from investors to finance its share of the ABN AMRO purchase. For much of late July and August, ABN AMRO shares traded between Barclays’ offer price and the consortium’s offer price, suggesting uncertainties over the outcome of the battle. However, Fortis, RBS (Eur 22-billion) and Santander (Eur 19.8-billion) all successfully raised the cash required to pay for ABN AMRO.

Barclays, meanwhile, was understood to be taking a wait-and-see stance, as it was convinced that the Dutch central bank and the EU anti-trust authorities would place tough conditions on Fortis’ plan to take over ABN AMRO’s Dutch operations.

Tremors from the U.S.

The takeover battle for ABN AMRO took another unexpected twist in August, when the credit crisis suddenly caused banks around the world to tighten lending activities. The formerly red-hot U.S. housing market, which had been in a slump since late 2006, began to cause massive loan losses in the global banking sector throughout the summer of 2007. Corporate bond prices slumped and trading of higher-risk mortgage loans, often packaged and re-sold to investors as collateralized debt obligations (CDOs), came to an abrupt halt when mortgage default rates soared. As many companies around the world had invested their short-term cash in these CDOs, the seize-up of CDO market caused a sudden shortage of cash. The resulting liquidity crisis led stock markets around the world to tumble. At one point, there were fears that both Barclays and the consortium would withdraw its offer for ABN AMRO due to their high exposure to the alternative investment market.

During the first wave of the credit market crunch in late-August, the value of Barclays’ mostly-stock offer fell sharply to Eur 58.4-billion (USD $79.3-billion, GBP 40.0-billion), essentially wiping out all the gain made by the cash injection from China Development Bank and Temasek. Despite a significant fall in RBS’ and Fortis’ share prices also, the value of the RBS-Fortis-Santander offer remained relatively steady at around Eur 70.6-billion (USD $96.5-billion) due to its high cash element. Nevertheless, several of RBS’ institutional shareholders in September 2007 were believed to have urged the bank to activate the “material adverse event” clause to reduce or even cancel the offer for ABN AMRO.

Cash is King. Barclays Loses the Battle But Wins Eur 200-million

Meanwhile, Barclays’ hope that Fortis would face anti-trust challenges in the Netherlands was dashed on 2007-10-03, when the European Commission cleared RBS-Fortis-Santander’s acquisition of ABN AMRO. One day after that, only 0.28% of the outstanding ABN shares were tendered to Barclays and the British bank conceded defeat. In accordance with the friendly merger agreement, ABN AMRO paid Barclays a Eur 200-million breakup fee. Meanwhile, the RBS-Fortis-Santander consortium received more than 86% of ABN AMRO’s shares and made its offer unconditional. The consortium's higher and almost all-cash offer clearly won over the hearts of ABN AMRO’s shareholders at uncertain times. At closing, the consortium’s offer was worth about Eur 70.0-billion (USD $101.0-billion).

Two of the Three Victors Became Big Losers

Even though RBS, Fortis and Banco Santander appeared to be the victors, against all odds, in the takeover battle for ABN AMRO, it soon became apparent that their acquisition could not have been executed at a worse time.

Throughout 2008 and 2009, the global real estate bubble burst and the CDO market collapsed. Recklessly careless lending by banks and carefree borrowing from consumers since 2000 together contributed to a massive housing and credit bubble in the United States, Great Britain, Spain, Ireland, Iceland and Eastern Europe. A huge amount of these consumer loans was re-packaged into “innovative” investment products that were off-balance-sheet, meaning that the loans were not subject to regulatory capital requirements.

When the bubble burst in 2007 and 2008, the impact was so severe that many of the world’s largest financial institutions including Citigroup, Bank of America, Wachovia, Merrill Lynch, Morgan Stanley, HBOS, Royal Bank of Scotland, Fortis and UBS certainly would have gone bankrupt were it not a concerted effort by governments around the world to inject much-needed capital into the banks, and to unconditionally guarantee their loan losses and customer deposits.
Shockingly, less than one year following their triumphant purchase of ABN AMRO, both the Royal Bank of Scotland and Fortis were de facto bankrupt in September 2008. At this point the Dutch state decided to buy ABN AMRO's Dutch operations from the bankrupt Fortis, which ironically, returned ABN AMRO to Dutch control. The Royal Bank of Scotland only survived because the British government nationalized the bank by injecting billions of pounds of new capital, as well as insuring hundreds of billions of sour loans against losses. Similarly, Fortis was nationalized by the Belgian and Luxembourg states. Fortis' Belgian operations were then taken over by BNP Paribas. Both RBS’ and Fortis’ shareholders lost almost 100% of their investment.

The Shrewd Santander

Banco Santander, on the other hand, came out of the ABN AMRO drama as a true and respected winner. In fact, just when the whole ABN AMRO deal was being closed, Santander surprised the market by selling Banca Antonveneta, ABN AMRO's Italian division that it had just acquired days earlier, to Banca Monte dei Paschi di Siena for Eur 9.0-billion (USD $13.21-billion) in cash. This meant that Santander only paid about Eur 9.8-billion for Banco ABN AMRO Real of Brazil, which was considered to be a bargain.

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Belgium Bank Mergers & Acquisitions (Fortis/ ageas)

Photo: Hong Kong's financial-centre status began to take off in the early 1980s, which coincided with a major expansionary phase of many European and American banks. The secondary school that I attended, Newman College, interestingly kept their account at the Hong Kong unit of Belgian bank Banque Belge pour l'Etranger, S.A. These two receipts show the nominal tuition (about USD $3) that my parents paid each year.

As part of the Société Générale de Belgique group (later Générale de Banque), Banque Belge pour l'Etranger eventually became part of the Fortis S.A., which was then acquired by France’s Banque Nationale de Paris.


ageas / Fortis Holding S.A./NV (Fortis S.A./NV)

Belgo-Dutch bancassurance group Fortis S.A. was formed in 1990 when Dutch insurer NV AMEV merged with Dutch bank VSB Groep to form AMEV/VSB. Later in that year, Belgian insurer AG Groep joined in, marking the first cross-border merger in the European financial services sector. The new entity took up the new name Fortis in 1991. In 2008, Fortis became de facto bankrupt and the banking operations were split and sold to the Dutch government and BNP Paribas. Fortis Holding kept part of the insurance operations and renamed itself ageas in 2010. Since this page is dedicated to banking history, emphasis is placed on the banking side of Fortis's history rather than the insurance side. Readers interested in the insurance part of Fortis are advised to visit ageas' corporate website.


AMEV

In 1847, a funeral fund was created in Utrecht (Netherlands) to allow a person to contribute (prepay) a premium of a few cents a week towards funding the eventual funeral cost of the contributor. In 1883, life insurance products were added to the funeral fund company, now known as Levensverzekering Maatschappij Utrecht (Life Insurance Society Utrecht), or commonly known as "De Utrecht". In 1920, the families that owned De Utrecht placed their business holdings under a new company called Algemeene Maatschappij tot Exploitatie van Verzekeringsmaatschappijen, or AMEV (loosely, the Insurance Development Company).


VSB Groep

VSB can trace its history to 1817 when the Maatschappij tot Nut van ’t Algemeen (Society for the Promotion of the Common Good) was established. The society's mandate was to promote educational and social welfare, and to encourage savings for the working class through its savings bank facilities. In the 1980s, legislation changes in the Netherlands allowed savings banks to expand their business beyond the traditional personal savings and residential mortgage markets. This essentially eliminated the distinction between savings banks and general (or trading) banks, which could receive deposits and make loans to businesses. In 1981, Vereniging Centrumbank (Amsterdam), Spaarbank Rotterdam and Bondsspaarbank Breda amalgamated and began operating under the name Verenigde Spaarbank (or VSB Groep) in 1983. The name means United Savings Bank in English.


AG Groep

In 1824, the Maatschappij van Algemene Verzekeringen op het Leven, de dotale fondsen en de overlevingen (roughly, the General Life Insurance and Survivors Fund Society), or AG Leven, was created in Belgium. It was followed in the 1830 founding of Maatschappij van Algemene Verzekeringen tegen de gevaren van brand, or AG Brand, which offered fire insurance. Gradually, accident insurance policies and mortgage loans were added to the product mix. In 1967 AG Leven and AG Brand combined to form AG Groep. In 1990, AG Groep joined the AMEV/VSB group and adopted the new name Fortis S.A. (meaning “strong” in Latin) in 1991.


Generale Bank / (Société) Générale de Banque (including Banque Belge pour l'Etranger)

In 1815, following the defeat of Napoleon, Belgium and the Netherlands gained independence from France and became a single country known as the United Kingdom of the Netherlands. In 1822, the Algemeene Nederlandsche Maatschappij ter Begunstiging van de Volksvlijt was founded to promote the development of agriculture, manufacturing and trade. Eight years later, however, the Belgians seceded from the Netherlands and gained independence. The Belgian side of the business became known as Société Générale de Belgique to offer corporate banking services. Société Générale, as it was commonly known (no relation to the French bank with the same short name), was pivotal in financing many of Belgium's early long-term industries. By the 1860s, the bank was said to hold 20% of the capital of Belgium's joint-stock companies. International operations flourished after 1872 when Société Générale took part in the creation of the Paris-based bank Société française et belge de Banque et d'Escompte.

Perhaps surprising to many, the Belgian bank's first expansion outside of Europe happened in China in 1902, when the Banque Sino-Belge (Chinese-Belgian Bank) was established in Shanghai, Beijing, Tianjin and Wuhan. The bank was set up specifically to receive and handle the reparations that China was required to pay to Belgium, plus ten other nations, following the Boxer Rebellion between 1897 and 1901, when anti-foreign factions attempted to eradicate Western imperialism and Christian missions in China.  The launch of the Chinese branches marked the beginning of the bank's rapid international expansion. In 1909, the Banque du Congo Belge (Bank of Belgian Congo) and Banque Belge-Zaïroise (Belgian-Zairean Bank) were created in Belgian Congo, followed in 1911 by the creation of the Banque Brésilienne Italo-Belge (Italian-Belgian Brazilian Bank) in Brazil.

Offices were soon opened in London (1909), Sao Paolo (1911), Egypt and Montevideo (1912), Rio de Janeiro (1913) and Buenos Aires (1914).  Meanwhile, in 1913, the bank's operations in London, Egypt, China and several other countries were re-organized into the Banque Belge pour l'Etranger (roughly translated as Belgian Foreign Bank).  For a number of years, Banque Belge pour l'Etranger, like many foreign banks operating in China at the time, issued part of China's banknotes.  

Interestingly, Banque Belge pour l'Etranger's London office became a saviour to the Société Générale de Belgique group during World War I when it kept the operations going while Belgium was occupied by the German army.

Further expansion saw the Banque Belge pour l'Etranger opening offices in New York in 1917, and in Paris, Manchester and Cologne in 1919, Bucharest in 1920, Constantinople in 1924 and Hong Kong in 1935.  Back in 1919, parent bank Société Générale de Belgique was a major backer in the creation of the Banque Générale du Luxembourg, which eventually became Luxembourg's largest commercial bank.  In 1920, Société Générale de Belgique participated in the re-capitalization of Austria's Wiener Bankverein, which like many Austrian banks suffered heavy losses following the collapse of the Austro-Hungarian Empire at the end of World War I.

An interesting fact about Banque Belge pour l'Etranger's New York office was that it eventually obtained a local state charter and built a network of retail branches in Long Island.  It subsequently became known as Belgian American Bank and then European American Bank & Trust, and was first sold to Dutch bank ABN AMRO, then to Citigroup in 2001.

The start of World War II and the turmoil in China in the 1940s caused the disintegration of Banque Belge pour l'Etranger, as many markets fell into enemies' control.  During World War II, with Belgium itself under Nazi occupation, Banque du Congo Belge, the Belgian Congo subsidiary, became the provisional head office co-ordinating whatever limited operations for parent firm Société Générale de Belgique. 

Following the world-wide conflict, the only meaningful overseas operations of Banque Belge pour l'Etranger to resume were surprisingly in New York and Hong Kong, the latter of which remained part of the Belgian bank group until 2004, when it was sold to ICBC.

The rise of the middle class in the 1950s and 1960s led the Belgian bank to vastly expand into personal (retail) banking in addition to its traditional business of corporate banking. Personal savings and loans, and mortgage products were introduced.  Between 1965 and 1975, the Société Générale de Banque (a new name replacing the Société Générale de Belgique) opened many new domestic branches. In 1985, the retail bank was renamed Générale de Banque. Then, in 1988, Société Générale de Banque was taken over by Compagnie Financière de Suez, the company that once operated the Suez Canal. In 1998, Suez sold the historic Belgian bank to Fortis S.A., a rival Belgian bank.

Recent transaction(s):

• In 1993, Fortis bought 50% of Belgium’s CGER-Banque and CGER-Assurances. ASLK-CGER traces its history back to the 1865 founding of the Caisse Générale d'Epargne et de Retraite (The Savings and Retirement Fund). [ASLK is the Dutch name of CGER.]
  In 1995, ASLK-CGER acquired SNCI-NMKN of Belgium. Société Nationale de Crédit à l'Industrie (NMKN -- Krediet aan de Nijverheid in Dutch) was established in 1919 and specialized in financing the shipping, steel, coal and textile industries. From the late 1980s, SNCI-NMKN began to offer banking services to private clients in addition to corporations.
• In 1995, Générale de Banque acquired Crédit Lyonnais Bank Nederland (CLBN) from France's Credit Lyonnais for NLG 1.2-billion (USD $726-million). Credit Lyonnais Bank Nederland was involved in a corporate scandal and poor risk management that saw the bank lending more than USD $1.3-billion to Italian financier Giancarlo Paretti to buy Metro-Goldwyn-Mayer Inc. in 1990. Soon after his purchase, MGM went bankrupt, causing CLBN and parent company Credit Lyonnais well over USD $1-billion in loan losses.
• In 1996, Fortis acquired Dutch merchant bank Mees Pierson NV from ABN AMRO Holding NV for Dutch Guilder 2.5-billion (USD $1.43-billion).
• In 1997, Fortis bought another 25% stake in ASLK-CGER-Banque (including its CGER-Assurances subsidiary), bringing its total holding in ASLK-CGER to 75%.
• In 1998, Fortis bought 98.2% of rival Belgian bank Générale de Banque (also called Generale Bank in Dutch) for USD $14.2-billion from Suez Lyonnaise des Eaux. Fortis beat out Dutch rival ABN AMRO Holding in the bidding war for Générale de Banque.
• In 1999, the various banking operations of Crédit à l'Industrie, ASLK-CGER, Générale de Banque and VSB were consolidated under the new Fortis Bank brand.
• Also in 1999, Fortis took full control of Belgian bancassurance firm ASLK-CGER.
• In 2000, Fortis agreed to buy the 47% of Banque Générale du Luxembourg S.A. that it did not already own for Eur 1.62-billion (USD $1.59-billion). BGL was founded in 1919 by the Société Générale de Belgique and other investors.
• Also in 2000, Fortis acquired the 80% of Dutch insurer ASR Verzekeringsgroep that it did not own for Eur 3.3-billion (USD $2.9-billion).
• Also in 2000, Fortis raised its ownership in Belgolaise Bank, a Belgian bank focusing in the African market, from 62% to almost 100%.
• In 2004, Fortis sold its Hong Kong network (known as the Belgian Bank since 1980) to the Industrial and Commercial Bank of China.
• In 2005, Fortis purchased 93% of Turkey's Disbank for Eur 987-million (USD $1.28-billion).
• In 2007, Fortis agreed to buy 50.48% of Hong Kong's Pacific Century Insurance from its parent PCRD for HKD $3.52-billion (USD $453-million, Eur 345-million). Fortis would also launch a general offer to all other shareholders at the same price, bringing the total value of the deal to HKD $6.98-billion (USD $897-million, Eur 683-million).
• In October 2007, after a six-month battle with Barclays plc, Fortis S.A./NV, along with The Royal Bank of Scotland Group plc and Banco Santander S.A., won the control of ABN AMRO Holding NV with a Euro 70.0-billion (USD $101.1-billion) cash-and-stock offer. The deal was then the world's largest banking merger ever and consisted of 93% in cash and 7% in Royal Bank of Scotland shares. The tri-bank consortium planned to break up ABN AMRO's global operations with Fortis taking over ABN AMRO's banking business in the Netherlands, as well as its global investment management and private banking operations. Until the break-up was completed, Fortis owned a 33.8% stake in ABN AMRO, while The Royal Bank of Scotland owned a 38.3% stake, with the remaining 27.9% being owned by Banco Santander.
• Late in 2007, Fortis sold its 8.23% stake in ICBC (Asia) to Industrial and Commercial Bank of China (ICBC) for HKD $1.92-billion (USD $246-million). Fortis had acquired the stake initially in 2004 when it sold its 22-branch Hong Kong network to ICBC (Asia).
• In 2008, Fortis S.A. agreed to sell 50% of its global asset management arm Fortis Investments to China's Ping An Insurance for Eur 2.15-billion (CNY 24.0-billion, USD $ 3.39-billion.) Fortis Investments planned to change its name to Fortis Ping An Investments after the deal was closed. Fortis Investments, along with the asset management business it bought from ABN AMRO Holding in 2007, had Eur 245-billion (USD $386-billion) of assets under management. Before this partial sale, Fortis had written down Eur 2.7-billion (USD $ 4.1-billion) in sub-prime mortgage-related assets, and was badly in need of new capital. However, this sale agreement was rescinded in September 2008 after Fortis collapsed. China’s banking regulator also had denied Ping An’s proposed investment.
• In 2008, Fortis agreed to sell its commercial-lending unit in the Netherlands to Deutsche Bank AG for Eur 709-million (USD $1.13-billion). The unit being sold was part of the ABN AMRO operations acquired by Fortis in 2007 and had a net asset value of Eur 1.01-billion. However, closing of the transaction was postponed indefinitely as the Dutch Central Bank had refused to grant approval pending a review of Fortis’ entire Dutch operations amidst the 2008 Banking Crisis.
• Also in 2008, Fortis sold its 49% stake in Chinese fund manager ABN AMRO TEDA to Britain's insurer and bank Old Mutual for Eur 165-million (USD $244-million). Fortis had acquired the stake in ABN AMRO TEDA when it acquired ABN AMRO Holding's Dutch operations in 2007.
• During the second half of 2008, Fortis was caught up in the global Banking Crisis. As financial institutions failed around the world from huge losses incurred from the U.S. real estate collapse, banks became unwilling to lend to each other, resulting in a sharp rise in the Libor rates (London Inter-bank Borrowing Rates). Banks that had over-extended themselves, including Fortis, experienced massive withdrawal of deposits from their clients, causing more stress to their capital base just when they needed more capital.
• On 2008-09-29, the Belgian, Dutch and Luxembourg governments jointly rescued Fortis by providing Eur 11.2-billion (USD $16.2-billion) of emergency funding. The Belgian state agreed to buy 49% of Fortis' Belgian banking unit, Fortis Bank NV/S.A. for Eur 4.7-billion (USD $6.79-billion); the Dutch state agreed to buy 49% of the Dutch bank unit, Fortis Bank Nederland Holding, for Eur 4.0-billion (USD $5.78-billion); whereas Luxembourg agreed to buy 49.99% of the local unit Fortis Banque Luxembourg for Eur 2.5-billion (USD $3.61-billion). Fortis was also expected to auction off the ABN AMRO businesses that it had just bought in 2007 for more than Eur 24-billion. However, the most likely buyer, ING Groep, had announced that it was not interested in bidding for ABN AMRO’s global operations.
• However, the massive cash injection from Belgium, the Netherlands and Luxembourg failed to quell widespread fears over Fortis’ solvency, and clients were said to be transferring their deposits to other banks. On Friday 2008-10-03, the Dutch government made a surprise announcement that it had agreed to nationalize the entire Dutch operations of Fortis S.A./NV for Eur 16.8-billion (USD $23.2-billion). The units bought by the Dutch government included all of Fortis Bank Nederland (Holding) NV, Fortis’s interests in ABN AMRO, insurer Fortis Verzekeringen Nederland NV, and Fortis Corporate Insurance NV. The Dutch government’s deal to buy all of Fortis’ Dutch banking and insurance operations replaced the deal to buy 49% of Fortis Bank Nederland for Eur 4.0-billion (USD $5.78-billion) announced just a week earlier.
• Even though Fortis’s Dutch operations were not believed to be badly in distress, the Belgian-based parent Fortis SA/NV had been teetering on the brink of insolvency. The Dutch government said in a statement that the nationalization of Fortis Nederland and ABN AMRO was needed to stabilize the panicky Dutch monetary system. The deal gave the Dutch government the entire control of the bancassurance operations, which would make it much easier to sell than had the government only acquired a minority stake. The deal also allowed Belgian-based Fortis to receive badly-needed capital.
• The loss of the more stable Dutch businesses, however, distressed the public confidence on Fortis even more so over the weekend. On Sunday 2008-10-05, the Belgian government stepped in for the second time in a week and pumped in another Eur 4.7-billion (USD $6.33-billion) to fully nationalize Fortis Bank S.A./NV to 100%. Belgium and Luxembourg then immediately sought help from French banking giant BNP Paribas S.A. Following hours of intense and frantic talks, BNP Paribas agreed to acquire most units of Fortis S.A./NV for Eur 14.5-billion (USD $19.5-billion). Under the agreement, BNP Paribas would buy 75% of Fortis Bank (Belgium) and 67% of Fortis Banque Luxembourg for Eur 9.0-billion (USD $12.1-billion), payable in BNP Paribas shares. BNP Paribas also agreed to buy all of Fortis’s insurance operations in Belgium for Eur 5.5-billion (USD $7.4-billion) in cash.
  Belgium had just taken full control of Fortis Bank S.A./NV hours earlier before brokering the sale to the French bank. Following the sale, the Belgian government would retain a 25% stake in the Belgian bank and hold an 11.6% stake in BNP Paribas.
• As for Fortis Banque Luxembourg, BNP Paribas would acquire a 51% stake from parent firm Fortis S.A./NV, and a 16% stake from the Luxembourg government, which had acquired a 49.99% stake in the Luxembourg unit a week earlier for Eur 2.5-billion. Luxembourg would retain a 33% stake in Fortis Banque Luxembourg, and hold a 1.1% stake in BNP Paribas.
• Following the sale, former parent company Fortis S.A./NV, to be renamed Fortis Holding, would only consist of Fortis’s minuscule international insurance operations outside of Belgium and Netherlands.
• BNP Paribas would gain Fortis’s 1,458 branches in Belgium, Luxembourg, Poland, Turkey, France, and other countries except the Netherlands. It would also gain more than Eur 239-billion of customer deposits, making BNP Paribas the largest bank in the Eurozone based on deposits.
• However, on 2008-12-12, a Belgian appeal court halted the sale of 75% of Fortis Bank S.A./NV, the sale of 67% of Fortis Banque Luxembourg, and the sale of all of Fortis’s Belgian insurance business to BNP Paribas. It was alleged that Belgian Prime Minister Yves Leterme had sought to influence a court into allowing the fire sale of Fortis. M. Yves Leterme resigned over the controversies, requiring the Belgian king to name a new, interim prime minister. Meanwhile, the latest court ruling required the sale be suspended for 65 days, citing that the Belgian government had not considered the interest of Fortis’s shareholders, nor allowed them to vote on the sale.
• When the original deal between Fortis S.A./NV, BNP Paribas, Belgium and Luxembourg died, Belgium was holding 100% of Fortis Bank, which consisted of 100% of Fortis Bank Belgium and 50.01% of Fortis Banque Luxembourg, whose name was officially changed to BGL (clearly a short form of the old Banque Générale du Luxembourg name) to avoid further negative association with the Fortis name. The remaining 49.99% of Fortis Banque Luxembourg had been held by Luxembourg since October 2008.
• On 2009-02-11, Fortis’s shareholders rejected the original agreement with BNP Paribas. Shareholders also rejected the sale of Fortis Bank Nederland to the Dutch government for Eur 16.8-billion back in October 2008, even though that sale had already been completed and was unlikely to be unwound. The rejection could open up potential lawsuits against the Dutch government for financial damages according to some legal experts.
• On 2009-03-08, the Belgian government, Fortis S.A./NV (for clarity reason, hereafter referred to as Fortis Holding) and BNP Paribas reached a new agreement on the future of the Fortis group. The deal was still subject to a vote by Fortis’s shareholders and there were strong opposition from Ping An Insurance of China (which owned just under 5% of Fortis Holding) and other major shareholders according to media’s reports.
• Under the new agreement, the Belgian government (which was already the sole owner of Fortis Bank Belgium) would transfer 75% of Fortis Bank to BNP Paribas for Eur 8.25-billion (USD $10.5-billion) in BNP Paribas shares, priced at Eur 68 per share. In addition, BNP Paribas would also pay Eur 1.375-billion (USD $1.75-billion) for 25% of Fortis Insurance Belgium from Fortis Holding. Finally, BNP would acquire a direct 16% stake in BGL from the Luxembourg state for about Eur 831-million (USD $1.06-billion) in BNP shares.
• Following the approval by Fortis’s shareholders, BNP Paribas would own 75% of Fortis Bank Belgium (the remaining 25% continued to be held by the Belgian state), hold 16% of Luxembourg's BGL (the former Fortis Banque Luxembourg), control another 50.01% of BGL via BNP's 75% holding in Fortis Bank Belgium (the remaining 34% of BGL continued to be held by the Luxembourg government). BNP would also hold 25% of Fortis Insurance Belgium.
• As of May 2009, Fortis Holding only consisted of 75% of AG Insurance (Fortis’ insurance operations in Belgium) as well as 100% of Fortis Insurance International. The demise of the Fortis financial empire was sad, painful, dramatic and swift.
• In 2010, Fortis Holding renamed itself ageas.
• In August 2015, Ageas sold its Hong Kong insurance operations to China's JD Capital for HKD $10.7-billion (USD $1.38-billion).

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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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