* SEPTEMBER 28, 2008, 12:20 P.M. ET
Sale or Break-up of Fortis Possible
As Talks Reach Highest Levels
By CARRICK MOLLENKAMP, DANA CIMILLUCA and JOELLEN PERRY
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LONDON -- The future of Fortis NV, the Dutch-Belgian bank whose roots date to the 1800s, hung in the balance Sunday with a sale of all or parts of the company possible as talks moved to the highest level of European officialdom, according to people familiar with the situation.
Fortis managers and government officials were considering two options for the beleaguered bank, the people said: A sale to a single buyer, or a break-up of the bank, which operates insurance and banking businesses throughout the wealthy Benelux region. Either option could depend on the willingness of government and central-bank officials to provide financial assistance or take on bad assets. Dutch and Belgian officials aim to announce a solution by Sunday evening.
Fortis management still was holding out some hope of selling assets in a last-ditch effort to remain independent, a person familiar with the situation said.
ING Groep NV, the big Dutch financial firm, is among the banks that could step in to buy part or all of Fortis, a person familiar with the situation said. Talks were ongoing Sunday, and France's biggest bank by market value, BNP Paribas SA, also is seen as a potential buyer, the person said. If Fortis is broken up, it is more likely that the Dutch and Belgian central banks may have to provide support by taking on some of the bank's souring assets.
Spokespersons for the three banks either declined comment or weren't immediately available for comment.
European Central Bank president Jean-Claude Trichet met Sunday afternoon with Belgian Prime Minister Yves Leterme to discuss the developing Fortis situation, said a spokesman for Mr. Leterme. Mr. Leterme has also called Belgium's government ministers to an emergency meeting at 6pm Central European Time Sunday, to present the range of solutions being discussed. Some of the solutions on the table would require government involvement, for which Mr. Leterme would need the ministers' approval.
Fortis has struggled in recent days amid a crisis of confidence that has seized the markets on which banks depend to borrow money. On Friday, the bank unexpectedly replaced its interim chief executive just hours after he tried unsuccessfully to reassure investors that the bank remains on sound footing. Its share price fell 20% Friday, to €5.20 ($7.60). Fortis shares are down 71% this year.
Officials from the Belgian central bank, the Dutch central bank and Belgium's Banking, Finance and Insurance Commission, or CBFA, began meeting Saturday in person and on the phone to hammer out a solution for Fortis. The in-person and telephone meetings continued through Sunday, with the aim of announcing a solution Sunday evening. Belgium's prime minister, Yves Leterme, met in person Saturday with officials from the CBFA and the Belgian central bank. Dutch central bank Governor Nout Wellink cancelled a keynote speech at the Federal Reserve Bank of Chicago Friday.
"We are working on enhancing the confidence in the market" for Fortis shares," CBFA spokesman Hein Lannoy told The Wall Street Journal Sunday. Officials from the Dutch central bank declined to comment Sunday, while the Belgian National Bank could not be reached for comment.
ING and BNP, which have so far survived the credit crisis largely unscathed, both would benefit by buying all or parts of Fortis. Of the two suitors, ING, a Dutch provider of insurance, investment and banking services, has more overlap with Fortis, and therefore would have more opportunities to cut costs and become more efficient as a result of a deal. BNP, aside from any political hurdles that a foreign company would be expected to face, has less overlap with Fortis. BNP focuses on banking and investment services, and therefore would likely not want to take on Fortis's insurance business, which accounts for well over half its market value of €12 billon ($17.5 billion), bankers say.
Still, a deal with ING may require antitrust waivers, given how dominant a combined company would be in insurance and banking in Belgium and Holland. Those may be more difficult to obtain than the waivers the U.K. government gave to Lloyds TSB Group PLC in its recent £12 billion ($22 billion) purchase of HBOS PLC, given that they would need to come from the European Commission.
A sale or break-up of Fortis is likely to raise more questions about the company's decision last year to join in the biggest banking deal ever: The purchase by a European consortium of Dutch bank ABN Amro Holding NV just before the onset of the credit crisis. Next year, Fortis is expected to take possession of ABN's private-client unit and Dutch operations, pending Dutch regulatory approval. Those assets currently reside in a holding company set up to facilitate the ABN-Amro purchase. If Fortis were to be sold or broken up, Fortis's stake in that holding company could be sold, said people familiar with the situation
Supervision of Fortis is split between Dutch and Belgian authorities. Belgium's CBFA is the lead supervisor for Fortis' banking operations at the holding level, while the Dutch central bank supervises the firm's insurance activities, as well as the Dutch arm of the banking unit. Bank supervision in Belgium is handled by the CBFA and in Holland by the central bank.
The Belgian National Bank could act as a lender of last resort to Fortis, lending it funds against collateral to tide it over until a sale or solution is final. Within the 15 countries that use the euro currency, the European Central Bank can inject funds into money markets on a mass scale, as it has been doing since the crisis erupted in August 2007. But the ECB cannot act as a lender of last resort for individual banks -- that responsibility falls to each national bank within the bloc. |
