Prime minister Francois Fillon insisted yesterday that the government would block any attempts by foreign rivals (like Italy’s Unicredit or Spain’s Santander) to get their mucky paws on SocGen, after the Jerome Kerviel scandal wiped billions off the bank’s share price. ‘Societe Generale will remain a great French bank,’ he said. ‘The government will not allow it to be the target of hostile raids by other banks.’
So far, so French. The problem is, it’s not allowed to do this under an EU directive that it signed up to last year, which was specifically introduced to improve transparency in banking mergers. After Italian bank governor Antonio Fazio flagrantly abused his position to block a takeover of an Italian bank by ABN Amro, the member countries agreed that future mergers would be assessed on five objective criteria – the idea being to prevent governments blocking foreign bids purely for protectionist reasons.
So unless France can show that any prospective suitor is lacking financial soundness, prudent management, a good reputation, or compliance with EU rules – or unless it can prove that it launders money or finance terrorists, which sounds like a long shot – it would be illegal to block the bid. A prominent competition lawyer told MT that the French government wouldn’t have a jambe to stand on. Although that’s never stopped them in the past, of course.
Nonetheless, shares in SocGen soared 10% yesterday, amid rumours that French rival BNP Paribas was planning a bid. Rumour has it that President Sarkozy has been lobbying for this behind the scenes, since it would at least leave the bank in French hands. However, opinion seems divided on how likely this is. BNP has tried to buy SocGen before, in 1999 – but pulling off a €36bn takeover during a global credit crunch is a big ask. Particularly since it came out with a profit warning of its own this morning.
In fact, that’s probably the one positive for SocGen at the moment. It may be sitting on huge losses and facing an embarrassing court battle with Monsieur Kerviel that could do permanent damage to its reputation – but most of the banks who might have been interested in buying it are in a pretty bad way themselves. Take UBS, which announced another $14bn write-down this morning.
So France might not even have to bother riding rough-shod over EU law...
Click here to read MT's take on another great tale of French protectionism, Pepsi's flirtation with Danone - as told by Danone CEO Franck Riboud...