BNP Paribas <BNPP.PA> took control of the Belgian and Luxembourg businesses of troubled financial group Fortis <FOR.BR> on Sunday in a complex rescue that will make Belgium the French bank's biggest shareholder.
The deal was the most spectacular cross-border rescue since the U.S.-born credit crisis swept into Europe last month, upending banks and rattling savers' confidence.
Under a share swap announced by Belgian Prime Minister Yves Leterme and BNP Paribas chief executive Baudouin Prot at a late night news conference, BNP will get 75 percent of Fortis Bank Belgium and all the group's Belgian insurance operations.
In exchange, Belgium will receive an 11.7 percent stake in BNP through the issue of new shares worth 8.25 billion euros ($11.43 billion).
BNP also agreed to buy 66 percent of Fortis Bank Luxembourg in exchange for a smaller stake for the Luxembourg state.
"The result of these measures will be that a leading European bank, BNP Paribas, will ensure that Fortis Belgium fulfills the conditions necessary for sustainability and its development," Leterme said in a statement.
"These measures are perfectly in line with the commitment by the Belgian state towards savers and customers, as well as with its concern to preserve employment within the Fortis group" — Belgium's biggest bank and private sector employer.
A portfolio of Fortis Bank Belgium's structured investment products worth 10.4 billion euros will be placed in a separate vehicle to be owned 66 percent by Fortis Group, 24 percent by the Belgian state and 10 percent by BNP Paribas.
The Belgian and Luxembourg governments will keep blocking minorities of 25 percent and 33 percent respectively in the Fortis banks in their countries.
The European Commission was consulted on the deal prior to its agreement, an EU spokesman said.
MESSAGE OF CONFIDENCE
BNP's Prot said the deal represented "a big message of confidence" in Fortis, which had "a formidable business base."
Leterme was forced to hold a second weekend of crisis talks after the Netherlands nationalised Fortis's Dutch operations on Friday for 16.8 billion euros in a move that caused bitterness between the two Benelux neighbours.
Belgium and Luxembourg took 49 percent stakes in the Fortis banks in their countries last Sunday in a rescue that lasted just five days because depositors and lenders fled.
The Belgian state raised its holding in Fortis Bank Belgium to 99.93 percent on Sunday at a cost of 4.7 billion euros before selling the 75 percent stake to BNP.
Leterme was less reassuring to Fortis shareholders, saying they took a risk by investing in any company and the state could not guarantee their investment.
Franco-Belgian financial group Dexia <DEXI.BR> meanwhile sought to dispel concern that uncertainty over a German salvage plan for troubled Hypo Real Estate <HRXG.DE> would create new problems for the bank rescued with public money last week. [ID:nWEB7984]
The German government and banks agreed late on Sunday on a revised rescue package for HRE. Dexia said in a statement that credit risks related to HRE would have a very limited impact on the group's solvency anyway and the Sept. 30 capital increase had taken account of possible negative impacts that could arise.
CASH CRUNCH
Dutch Finance Minister Wouter Bos said Fortis hit an acute cash crunch even after last Sunday's initial 11.2 billion euro rescue by the three governments as depositors withdrew money and banks refused to lend.
Dutch central bank Governor Nout Wellink confirmed that the Netherlands had never paid its 4 billion share of the plan.
Sources close to the situation said BNP Paribas pulled out of the original rescue negotiations after offering just 1.60 euros a share, compared to Fortis' market price of 5.40 euros, and demanding state guarantees against future losses.
There was no mention of guarantees in Sunday's statement.
