(Adds quote, background on strategy)
LONDON, June 13 French bank Societe Generale
is in talks to buy out rival Credit Agricole's
50-percent stake in their jointly owned brokerage
Newedge, several sources familiar with the matter told Reuters.
SocGen had previously sought to exit derivatives-focused
Newedge, as part of a post-crisis drive to strengthen its
balance sheet, but a lack of buyers has pushed France's No. 2
listed bank to look instead at ways it might better integrate
the business by taking full control, the sources said.
SocGen and Credit Agricole have yet to reach agreement on a
price, one of the sources said, adding it was a complex business
in an uncertain market environment. The total business has an
equity value of around 800 million euros to 1 billion euros
($1.07-$1.33 billion), according to banking and analyst sources.
"SocGen, which previously has wanted to sell its 50-percent
stake in Newedge, is now looking at buying the whole business,"
said one of the sources. "After trying to sell it, it became
obvious that they weren't going to get a good price, so now it's
about doing the next best thing."
Spokeswomen for Societe Generale and Credit Agricole CIB
declined to comment. Newedge referred a request for comment to
its parent shareholders.
SocGen - which has kicked off a drive to cut 900 million
euros in costs through 2015 - is giving priority to flow
products, or the trading of low-risk securities that consume
little capital, and believes that taking over Newedge would fit
into this strategy, the source said.
Newedge has also recently taken steps to restructure itself.
In December it said it was considering a split of its asset
execution and clearing businesses as part of a wider
restructuring aimed at making it more competitive.
Newedge last year reported a halving of net profit, to 14
million euros ($18.67 million), versus 33 million in 2011. It
had around 50 billion euros in assets at end-2012.
($1 = 0.7498 euros)
(Reporting by Lionel Laurent in Paris, Michael Flaherty and
Nishant Kumar in Hong Kong; Additional reporting by Denny Thomas
in Hong Kong and Matthias Blamont in Paris; Editing by Carmel
Crimmins and Elaine Hardcastle)