Paris - French bank BNP Paribas will pay 14.5 billion euros (19.7 billion dollars) to take over the majority of the troubled insurance and banking giant Fortis in Belgium and Luxembourg, BNP Paribas said on Monday. "Following this transaction, the Fortis group is no longer active in the banking sector, nor in the Belgian insurance sector," Filip Dierckx, CEO of Fortis, said in a statement.
"Given the extremely difficult environment in which we are evolving, the integration of Fortis Bank and Fortis Belgian Insurance into a true European financial leader is the best solution both for our clients and for all other interested parties," he said.
The deal, which involves 9 billion euros' worth of shares and 5.5 billion euros in cash, includes the purchase of 75 per cent of Fortis from the Belgian government and 16 per cent of Fortis Luxembourg, which raises BNP's stake in the Luxembourg segment of Fortis to 67 per cent.
As part of the deal, the Belgian government first purchased 100 per cent of Fortis' Belgian activities. As a result, Brussels will retain an 11.6-per-cent stake in BNP Paribas.
"These measures are perfectly in line with the engagement the Belgian state took towards Fortis' account-holders and clients," Belgian Prime Minister Yves Leterme said in a statement.
"As a result, a European bank of the first order, BNP Paribas, will assure to Fortis Bank Belgium the conditions needed for its long-term survival and development," he said.
In addition, the Dutch government acquired all of Fortis' insurance and banking business in the Netherlands.
By taking over 239 billion euros worth of deposits in Belgium and Luxembourg, BNP Paribas becomes the leading bank in the two countries and the largest savings deposit bank in the euro zone.
On September 28, in a desperate move to save the bank, the governments of the Netherlands, Belgium and Luxembourg had partially nationalized Fortis by purchasing 49 per cent of its businesses in their respective countries, supplying the bank a total of 11.2 billion euros to help keep it afloat.
The bail-out provided the bank with the funding it had desperately needed since its joint takeover, along with the Royal Bank of Scotland and Spain's Banco Santander, of ABN Amro in October 2007.
But in June 2008, Fortis publicly announced its need for substantial extra funding. That led to a crisis in confidence in the bank which it failed to stem with repeated assurances that its finances were sound.
The BNP Paribas move signals the final step in the dismemberment of what was once Belgium's biggest bank.
All that is left to Fortis now is its insurance business in countries such as Britain, France and Hong Kong, together with joint ventures in China, India, Malaysia, Thailand, Luxembourg and Portugal, the statement said.
