PARIS Societe Generale (SOGN.PA), France's No. 2 listed bank, said it would offer to buy out minority holders of its online bank brand Boursorama FMTX.PA, a move designed to increase its presence in a growth sector as high street banking declines.
European lenders like SocGen and rival BNP Paribas (BNPP.PA) are boosting their online business to counter low-cost Internet competitors, and a drop in the numbers of clients coming into their branches, both of which are hurting profits and forcing them to close outlets.
BNP Paribas launched a Europe-wide online bank called Hello Bank last year, which has 13,000 French clients. Boursorama, which offers online broking, banking and other financial services in France, the UK, Germany and Spain, currently has 505,000 French clients and is targeting 600,000 by the end of this year. Both are overshadowed by ING Direct, a unit of Dutch bank ING (ING.AS), which has 880,000 French clients.
"This (deal) is attractive for SocGen because it is essentially buying a source of deposits," said Alex Koagne, analyst at Natixis.
At end-2013 Boursorama had 4.48 billion euros in customer deposits and 2.61 billion euros in customer loans.
Koagne noted that the deal was somewhat limited because Spain's Caixa Group (CABK.MC) would not be tendering its stake. SocGen already owns 56 percent of Boursorama while Caixa owns 21 percent.
SocGen said on Tuesday it would file an offer of 12 euros ($16.71) per share through France's AMF regulator for the roughly 23 percent that is held by minorities. That's a premium of 22 percent to Boursorama's Monday closing price of 9.83 euros, and worth a total 242 million euros ($337 million).
While some investors might have hoped for a higher bid price, SocGen's current shareholding of 56 percent means the offer is unlikely to face resistance, Montsegur Finance fund manager Francois Chaulet said.
"One can always dream of a higher price...But it's difficult (to achieve) because SocGen already has a very high stake," said Chaulet, who owns Boursorama shares and who plans to tender them at the offer price.
"Banks are right to be making these kinds of investments at a time when liquidity is cheap...Boursorama has the capacity to acquire new clients," he added.
Boursorama reported an annual loss in 2013, hurt by writedowns on the acquisition value of assets abroad, namely its U.K. broker unit Selftrade and German financial portal OnVista. Boursorama pledged to keep growing loans and deposits in 2014 and to target new customer bases.
French retail banking accounted for about one-third of SocGen's revenue in 2013, on a par with revenue derived from SocGen's substantial retail operations abroad including Rosbank in Russia.
Shares of Boursorama were suspended from trading at the company's request Tuesday morning. SocGen's shares opened up 0.2 percent, at 44.43 euros, versus a flat STOXX Europe 600 banks index .SX7P.
If more than 95 percent of minority investors tender their shares, SocGen will proceed with a mandatory delisting. ($1 = 0.7180 Euros)
(Reporting by Lionel Laurent; Editing by Sophie Walker)