Buying Societe Generale? They’ll Throw In Belgium

Ever since the buffer state of Belgium was carved from its neighbors in 1830 there have been four principal powers: the Parliament, the royal family, the Roman Catholic Church and Societe Generale de Belgique, a holding company that has a finger in most of the country’s important commercial enterprises.

In recent weeks the normally discreet company has been presented to newspaper readers in two different lights--as the harried object of a takeover bid by a mysterious (and possibly fictitious) foreigner, and as the complacent beneficiary of one of the largest government contracts in Belgium in this decade. There is little doubt that the second Societe Generale is the real one.

The takeover rumors emerged last month from the largely unregulated Belgian stock market, where insider trading is an everyday occurrence and 75% of transactions are unreported. There were estimates that trading volume in Societe Generale’s 25 million outstanding shares was reaching 150,000 a day--a huge figure for the Belgian exchange. The financial press, avid for news in the slow Belgian summer, leaped on the story.

At the company’s elegant headquarters which share a leafy square with Parliament and the Royal Palace, uniformed attendants were sitting behind tiny desks in the hushed halls while coroprate officials said they would battle any takeover bid to the last franc. The government, a center-right coalition, said it was unthinkable to let Societe Generale fall into hostile hands. Buying the company would be equivalent to buying Belgium itself, said more than one financial commentator.

In all the uproar the stock rose steadily, from 3,440 Belgian francs (about $90) at the outset to 4,160 at the height of the rumors--a gain of 21%. Then people started remembering that the company had announced two new stock offerings this year, with the price determined by current quotations for existing shares. They also remembered that the stock was to begin trading on the Tokyo exchange in the fall. Could it be that Societe Generale was hyping its own shares? No one was admitting anything, but those who have followed the company’s profitable history considered it a likely scenario.

The second bit of news was more in the classic Societe Generale mold. The government announced this week, after years of debate, that the lion’s share of its $1.5 billion telephone-modernization contract would go to Alcatel NV, a company created last December by the merger of telecommunications operations of ITT and the French-owned Compagnie Generale d’Electricite. Guess which Belgian company holds 5.7% of Alcatel’s shares, purchased when the new company was formed?

The telephone victory was only the latest in a more than 150-year series of victories for Societe Generale. The company was founded in 1822, before Belgian independence, by King William I of the Netherlands. For part of the 19th Century it was Belgium’s central bank, issuing its currency. With the Belgian King Leopold II it collaborated in acquiring the Congo as a private holding, then selling it to the Belgian state. Belgium’s record in its colony was one of the most brutal of all the colonial powers, abetted by Societe Generale’s central place in the Belgian economy. If the Congo did not produce ore and rubber for the company’s factories at home, the wealth of Belgium as a whole would suffer.

Readers might remember in Joseph Conrad’s classic novel, “Heart of Darkness,” a thinly disguised Societe Generale as the sinister employer of Kurtz and Marlowe. “I had no difficulty in finding the Company’s offices,” says the narrator, when visiting in Brussels. “It was the biggest thing in town.”

The Congo became the company’s biggest money spinner, but it has always laced heavy industry with banking and high technology, looking out for the newest sources of profits. Its armaments factories were one of the world’s first producers of machine guns. The uranium in the Hiroshima and Nagasaki bombs came from Societe Generale’s mines in the Congo. Its chemical and arms subsidiaries were recently reported to be selling ammunition through third countries to both Iran and Iraq.

The company now has stakes in 1,267 companies around the world, most hidden from view by a wilderness of subsidiaries and sub-subsidiaries. Its stock is a favorite of pensioners and institutions, as well as the Belgian royal family and the church.

Defenders of the company say that Societe Generale’s entrepreneurial skills have kept Belgium among the world leaders in trade--the country is near the top of the list in exports per capita. The high standard of living in Belgium and its extensive social services are due to the muscle of companies like Societe Generale, the argument goes.

Critics say that the enormous concentration of power in one place has inhibited competition and made Belgium backward in such areas as consumer protection and fair trading. There is little question that the fearsome Mobutu dictatorship in Zaire, formerly the Belgian Congo, owes a lot to Societe Generale’s continuing commercial needs there.

Whatever the political assessment, there is little question that the conservative Societe Generale ethic will remain at the center of Belgium’s commerce. The company nearly doubled its profits last year, to about $125 million, and is working on plans to increase its capitalization 60% by 1991.