SocGen merger talk back on as Bouton moves aside

The logo for France's bank Societe Generale is seen in Paris February 13, 2008.

PARIS (Reuters) - Takeover talk returned to stalk Societe Generale on Friday after its head, Daniel Bouton, who has been a staunch defender of the French company's independence, lost some of his executive powers.

SocGen said late on Thursday that Bouton would hand over his chief executive role to Frederic Oudea, formerly finance director and deputy chief executive at the bank. Bouton will hold onto his position as chairman.

Bouton faced severe criticism after SocGen announced in January record trading losses of 4.9 billion euros ($7.76 billion). The bank said the losses were caused by rogue deals conducted by Jerome Kerviel, one of its junior traders.

Some analysts said Bouton might leave altogether at some point, which could leave the bank more open towards a merger. SocGen has long been seen as a target for domestic rival BNP Paribas.

"The fact that Bouton will now be chairman with a new CEO ... really opens the door to a potential deal," said a Paris-based equity trader.

The bid speculation caused SocGen shares to rise sharply. The stock was the top gainer on France's benchmark CAC-40 index

and was up 5.7 percent at 75.05 euros in early afternoon trade.

SocGen outperformed a 1.8 percent rise in the CAC-40 and a 2.6 percent rise in the DJ Stoxx European bank sector. It has a market capitalization of around 40 billion euros, including the effects of a recently completed 5 billion euro rights issue.

Michael Sellam, the head of French fund management company Iris Finance, said it was feasible that Oudea could be more open towards a merger than Bouton. Iris Finance owns SocGen shares.

"It's not improbable," he said.

BOUTON COULD STILL BLOCK ANY DEAL

However, Sellam and others cautioned against reading too much bid speculation into the SocGen boardroom reshuffle.

Sellam said Bouton could stay for a while at SocGen, just as the former chief executive of BNP Paribas, Michel Pebereau, has remained chairman at BNP Paribas.

"It is premature to say today that Bouton will leave as chairman," he said.

"If SocGen wants to merge with someone, he can still say no. He can get rid of whoever he wants at the bank if they do not share the same opinion as him."

Another trader said that while he believed that a new SocGen board would at some point seek a merger deal, any such transaction would not happen in the immediate future.

In March, BNP Paribas said it had decided against considering a deal with SocGen, having previously said it was looking at the bank.

BNP Paribas, with a stock market value of around 64 billion euro, narrowly failed to buy SocGen in 1999.

A Geneva-based fund manager who used to work for SocGen also said Bouton would be reluctant to let go of the bank. It was under Bouton that SocGen boosted its investment banking arm, developing a world leading position in equity derivatives.

"It's his baby, I don't think he's going to let it go. I doubt he's just going to give it up," said the fund manager who declined to be named.

However, an analyst at a U.S. investment bank said the merger scenario remained a credible one given the boardroom change.

"The departure of Bouton is good news. Bouton is blocking any type of merger."

(additional reporting by Yann Le Guernigou; Editing by Andrew Hurst)

(Reporting by Sudip Kar-Gupta, Blaise Robinson)