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 February 1998, SocGen acquired New York-based investment bank Cowen & Company for USD $540-million. Cowen specialized in the health care, technology and communications industries. The business was renamed SG Cowen Securities after being merged with SocGen's existing American investment banking operations.

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 bought Poland's Euro Bank SA (also branded as eurobank). Euro Bank had 110 offices in Poland offering consumer credit products.
• 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 July 2006, SocGen spun off 75% of its SG Cowen Securities in an IPO for USD $180-million. The newly-listed business was renamed Cowen Group Inc.
• 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.
• In November 2018, SocGen sold its Polish subsidiary Euro Bank S.A. (also known as "eurobank") to Bank Millennium S.A. for PLN 1.83-billion (EUR 426-million, USD $485-million). Bank Millennium is 50.1% owned by Portugal's Banco Comercial Português (BCP). Euro Bank's 250 branches and another 251 franchised locations will join Bank Millennium's 359 branches, with some branch closures expected.
• In December 2019, SocGen agreed to sell its Norwegian-based SG Finans division to Helsinki-based Nordea Bank for EUR 575-million (USD $634-million). SG Finans provides equipment finance and factoring solutions in Norway, Denmark and Sweden.

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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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