BNP’s Offer for Rivals Startles Banking Scene

A menage a trois among French banking company BNP and already merging Societe Generale and Paribas could open up the French market and rapidly raise the stakes in the European banking scene.

The shocking $37-billion hostile bid by Banque Nationale de Paris for its two rivals--a deal that would create the world’s largest bank, with $1 trillion in assets--probably provoked urgent discussions in bank boardrooms from Amsterdam to Zurich because the major European players will not want to see the important French market tied up by French players, analysts said Wednesday.

BNP’s bold takeover offer, lodged late Tuesday, would create a major European bank able to fight it out in a fast-consolidating global market.

“The biggest issue arising from this is that it potentially opens up the French market to foreign ownership,” said J.P. Morgan European banking analyst Catherine Woods.

German, Dutch and Swiss banks could all be potential buyers in France, she said.

However, BNP Chairman Michel Pebereau made it clear at a news conference that part of the motivation for the deal was to ensure that cross-border mergers involving France could now be done on an equal basis.

Analysts also said that the moves in France could set off further consolidation in Europe as banks fight for the scale that may be necessary to succeed in the future euro banking market.

Paribas and Societe Generale on Wednesday called board meetings for today and Friday, respectively, to decide how to fight the hostile bid that threatens to break up the $16-billion merger they agreed only last month.

BNP offered 15 of its shares for seven Societe Generale shares, a value of $181.46 per share, or a premium of 14% above Tuesday’s closing price. The bank is also offering 11 of its shares for eight Paribas shares. That values Paribas at $116.43, 18% above its Tuesday closing price on the cash market, where the shares are most commonly traded during the offer period, which started Feb. 12.

The proposed new global banking giant is not likely to pose a threat to U.S. banking titans, such as Citigroup Inc., Chase Manhattan Corp. and BankAmerica Corp., in part because its market capitalization would still be smaller than theirs, U.S. analysts said.

The three French banks, if merged, would have a market capitalization of about $50 billion. By contrast, Citigroup has a market capitalization of $145 billion.