BNP Paribas scoops up Fortis assets in credit crunch

By Sudip Kar-Gupta and Phil Blenkinsop

PARIS/BRUSSELS (Reuters) - BNP Paribas agreed to scoop up assets in Belgium and Luxembourg of banking and insurance group Fortis for 14.5 billion euros ($20.1 billion) to become the euro zone's biggest deposit bank.

The move followed a weekend of frantic talks with authorities in the two countries eager to stem a cash drain on Fortis and Belgian-French bank Dexia, which received a 6.4 billion-euro bailout last week.

BNP Paribas will buy control of Fortis's banking businesses in Belgium and Luxembourg for 9 billion euros, funded through 132.6 million new shares, it said in a statement on Monday.

The French bank, one of the least affected by the crisis in credit derivatives that has brought down rivals on both sides of the Atlantic, will also buy Fortis Insurance Belgium for 5.5 billion euros in cash, it said in a statement.

The combined bank will have deposits of around 600 billion euros, BNP said in slides on its Web site.

"It's a good deal for BNP Paribas. The price does not seem excessive," Agilis Gestion fund manager Arnaud Scarpaci said.

Shares in BNP Paribas were 3.5 percent lower at 68.86 euros by 0850 GMT but outperformed a 6.6 percent drop on the DJ Stoxx European bank index. Shares in Fortis were suspended.

BNP stock has fallen around 4 percent since the start of the year, compared to a 32 percent decline in the bank index.

Only a week ago Benelux governments rejected an offer by BNP Paribas as too low. Belgium and Luxembourg returned to the negotiating table with BNP after the Netherlands suddenly decided to fully nationalize the Dutch parts of Fortis.

The Fortis deal is the biggest cross-border rescue since the full force of the credit crisis swept across the Atlantic into Europe last month, upending banks and rattling saver confidence.

Under a share swap announced by Belgian Prime Minister Yves Leterme and BNP Paribas's Chief Executive Baudouin Prot at a late night news conference, BNP will get 75 percent of Fortis Bank Belgium and all the group's Belgian insurance operations.

In exchange Belgium will receive an 11.6 percent stake in BNP through the issue of new shares worth 8.25 billion euros, making it BNP's biggest shareholder.

BNP also agreed to buy two thirds of Fortis Bank Luxembourg in exchange for a smaller 1.1 percent stake for Luxembourg.

"The result of these measures will be that a leading European bank, BNP Paribas, will ensure that Fortis Belgium fulfils the conditions necessary for sustainability and its development," Leterme said in a statement.

BNP said the takeover would boost earnings from the first year, improve its capital ratios and bring 500 million euros of synergies by 2011. BNP's proforma Tier 1 ratio would improve by some 35 basis points, it said.