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French bank deal announced
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February 1, 1999: 7:16 a.m. ET
Société Générale buys Paribas to create France's biggest bank
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LONDON (CNNfn) - In a dramatic announcement Monday, French bank giant Société Générale says it is buying smaller rival Paribas in a stock swap worth 15.1 billion euros ($17.26 billion), creating France's biggest bank.
The new bank will be called SG Paribas, and topples Credit Agricole as France's largest banking group. It will have total assets of 679 billion euros ($776 billion), and will have investment funds under management worth 200 billion euros.
SocGen is offering five shares for every eight shares in Paribas. The bid amounts to a 17 percent premium on Paribas' price over the past 20 days. Paribas stock closed at 84 euros Friday, valuing the bank at 13.59 billion euros. SocGen shares closed at 158.
Trading in the two shares is suspended until 14:00 hours GMT.
Banking analyst Daniel Davies of Robert Fleming Securities said the deal was a necessary one, but that SocGen would likely remain on the prowl for more retail assets.
Nevertheless, the deal boosts SG Paribas to top slot in French consumer finance. "You have to ask where this will leave (French banking giant) BNP (PBNP), and the German banks must also be wondering what to do. Some of them must have thought Paribas would make an ideal target," he said.
Rolf-Ernst Breuer, chairman of Deutsche Bank (FDBK) said the deal will spur more bank deals in France and Europe as a whole. He told CNNfn,: "I'm very happy the French have moved to restructure and accepted the need for reform. This will open the door for many more developments in the French financial services market."
"We're just at the start of the consolidation process in Europe (and) we have many more things to work on," he added. Breuer predicted there would eventually only be 5 to 10 major European banks, though he didn't give a timetable for that.
Two weeks ago, Spain's Banco Santander and Banco Central Hispano announced plans to merge.
SocGen has a strong retail presence in France, as well as an international investment banking business. Paribas has concentrated on investment banking, capital markets and specialized financial services in recent years.
SocGen believes savings from the deal will hit 800 million euros each year from 2001. It intends to make a 15 percent return on equity and aims to increase net profits per share by a minimum of 15 percent over the next three years.
SG Paribas will be headed by Paribas chairman Andre Levy-Lang. SocGen's chief Daniel Bouton will take over his position in 2002. 
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SocGen
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