Constant Brand, THE ASSOCIATED PRESS

Stumble Upon

del.icio.us

Digg

Facebook

Print

Email

Speak Up

BRUSSELS, Belgium - French banking giant BNP Paribas says it will take a 75 per cent stake in the remaining operations of troubled bank Fortis NV.

Belgian Prime Minister Yves Leterme said the deal gives the Paris-based bank control of Fortis' Belgian and Luxembourg operations, including the bank's insurance and investment arms.

The Belgium and Luxembourg governments also will receive a blocking minority share in BNP Paribas.

Leterme said it was important for another bank to take over troubled Fortis to restore confidence in the company before markets reopen.

The bank's stock has plummeted in recent weeks amid fears it could be declared insolvent.

A previous bailout last week, which left Belgium and Luxembourg with 49 per cent share stakes each in Fortis, failed to quell widespread concerns over the bank's solvency.

Under the deal announced Sunday, the Belgian government will buy all remaining shares in Fortis Belgium for euro4.7 billion (US$6.5 billion) and then sell a 75 per cent stake to BNP Paribas for euro8.25 billion (US$11.4 billion).

It will receive an 11.7 per cent minority share in BNP Paribas.

Luxembourg will get a 1.4 per cent share in BNP.

The Belgian government will also keep a 25-per-cent stake in Fortis' Belgian operations and Luxembourg will hold a 33-per-cent share in the bank's Luxembourg subsidiary.

Leterme said the minority stakes in BNP would give the governments the power to ensure the French bank does not move to cut jobs at Fortis.

The bank currently employs some 25,000 in Belgium.

Banking officials and authorities have been in closed-door talks all weekend in an effort to restore credibility and trust in Fortis after Dutch government announced Friday it was buying Dutch-held operations of the bank.

It was to make the deal for euro16.8 billion (US$23.2 billion) after a previous bailout failed to remove market doubts.

The Dutch move effectively split Fortis in two along national lines but led to renewed concerns that Fortis' remaining operations would continue to suffer.

Fortis last week lost a potential buyer of half of its asset management arm, Fortis Investments, when Chinese insurer Ping An Ltd backed out of an earlier agreement to pay euro2.15 billion (US$3.39 billion) for the unit.

Then Fortis essentially confirmed rumours that had dogged it for months by disclosing huge losses in its credit derivatives portfolio - noteworthy because few European banks have been full and frank about their woes.

It warned that further write-downs are possible.

Fortis, once one of Europe's largest financial companies, was laid low in part by its ill-timed acquisition of the Dutch banking operations of ABN Amro last year for euro24 billion (US$33 billion) as part of the largest takeover in banking history.

The company's share values have plummeted some 70 per cent since January and they fell Friday to euro5.42 (US$7.50).

The deal announced Sunday likely will wipe out the common shareholders since the Belgian government will hold the remaining 25 per cent stake in Fortis' Belgian operations not held by BNP.