French banking giant BNP Paribas will take a 75 percent stake in the remaining operations of troubled bank Fortis NV, the Belgian government announced Sunday.
Prime Minister Yves Leterme said the deal gives the Paris-based bank control of Fortis' Belgian and Luxembourg operations, including the bank's insurance and investment arms. The Belgium and Luxembourg governments also will receive a blocking minority share in BNP Paribas.
"No client or depositor (at Fortis) will end up in problems due to the financial crisis," Leterme told reporters late Sunday after two days of closed-door talks between BNP Paribas and government officials.
Leterme said it was important for another bank to take over troubled Fortis to restore confidence in the company before markets reopen Monday.The bank's stock has plummeted in recent weeks amid fears it could be declared insolvent.
A previous bailout last week, which left Belgium and Luxembourg with 49 percent share stakes each in Fortis failed to quell widespread concerns over the bank's solvency.
Under the deal announced Sunday, the Belgian government will buy all remaining shares in Fortis Belgium for euro4.7 billion ($6.5 billion) and then sell a 75 percent stake to BNP Paribas for euro8.25 billion ($11.4 billion) and receive an 11.7 percent minority share in BNP Paribas. Luxembourg will get a 1.4 percent share in BNP.
The Belgian government will also keep a 25 percent stake in Fortis' Belgian operations and Luxembourg will hold a 33 percent share in the bank's Luxembourg subsidiary.
Leterme said the minority stakes in BNP would give the governments the power to ensure the French bank does not move to cut jobs at Fortis. The bank currently employs some 25,000 in Belgium.
Banking officials and authorities have been in closed-door talks all weekend in an effort to restore credibility and trust in Fortis after Dutch government announced Friday it was buying Dutch-held operations of the bank for euro16.8 billion ($23.2 billion) after a previous bailout failed to remove market doubts. The Dutch move effectively split Fortis in two along national lines but led to renewed concerns that Fortis' remaining operations would continued to suffer.
Fortis last week lost a potential buyer of half of its asset management arm, Fortis Investments, when Chinese insurer Ping An Ltd backed out of an earlier agreement to pay euro2.15 billion ($3.39 billion) for the unit.
Then Fortis essentially confirmed rumors that had dogged it for months by disclosing huge losses in its credit derivatives portfolio — noteworthy because few European banks have been full and frank about their woes. It warned that further write-downs were possible.
Fortis, once one of Europe's largest financial companies, was laid low in part by its ill-timed acquisition of the Dutch banking operations of ABN Amro last year for euro24 billion ($33 billion) as part of the largest takeover in banking history.
The company's share values have plummeted some 70 percent since January and they fell Friday to euro5.42 ($7.50). But the deal announced Sunday likely will wipe out the common shareholders since the Belgian government will hold the remaining 25 percent stake in Fortis' Belgian operations not held by BNP.
Media reported that it was unclear whether trading in Fortis would continue as usual, since parts of the Dutch takeover of its operations in the Netherlands and the BNP Paribas deal still needed to be finalized.
Meanwhile French-Belgian bank Dexia SA insisted Sunday that the bailout of German lender Hypo Real Estate would only have a "very limited impact" on its own solvency. It said last week's government and shareholder injection of euro6.4 billion (US$9.2 billion) would allow it to weather "deteriorating conditions."