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LONDON, June 13 (Reuters) - 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