BRUSSELS (Reuters) - Shareholders of Fortis on Wednesday rejected the state-led deals that carved up their stricken financial group, delivering a potentially fatal blow to BNP Paribas’ Belgian expansion plans.
Faced with heavy losses and the prospect of a share of toxic assets, they first voted against the Netherlands’s purchase of Fortis’ Dutch assets by a 57 percent majority.
Then, by a wafer-thin 50.3 percent, they rejected Belgium’s move to take control of banking unit Fortis Bank.
Acting Fortis Chairman Jan-Michiel Hessels said it made no sense to proceed to the third and final part of the carve-up — BNP Paribas’s purchase of 75 percent of Fortis Bank and a stake in the Belgian insurance operations from Fortis.
The Belgian government, which collapsed over the Fortis debacle in December, has been desperate to close the deals.
Finance Minister Didier Reynders told Belgian news agency Belga that the BNP tie-up remained the best option and that the cabinet would likely meet on Wednesday evening.
The Dutch and Belgian deals have already closed, although will likely prompt legal appeals for damages. The Dutch government said its deals were legal and irrevocable.
BNP Paribas also said on Wednesday an initial agreement, signed last October, to buy the Fortis assets remained legally binding.
“BNP Paribas notes today’s result of Fortis’ shareholder meeting. BNP Paribas appreciates the positive vote cast by a large number of shareholders and the support of so many of Fortis Bank employees,” it said in a statement.
“BNP Paribas points out that only the original protocol signed on October 10, 2008 remains valid until February 28, 2009,” it added.
Some 5,000 investors had gathered in Brussels to vote on the situation and spent five hours in heated debate.
The meeting was called after shareholders won a legal battle freezing the state-led break-up of their company in October and the sale of mostly Belgian assets to BNP.
Fortis Bank said it noted the shareholders’ decision and added it would make a statement on the situation in due course.
BNP’s ambition of becoming the euro zone’s biggest deposit-holder by pushing into Belgian and Luxembourg is now under threat. BNP Paribas shares closed down 2.1 percent at 27.80 euros.
“It’s not completely over yet but they’ll have to start again from scratch. We will know very soon if BNP wants to go ahead,” said Pierre Flabbee, analyst at Kepler Capital Markets.
“On the one hand, BNP will be able to get out of having to finance Fortis and take on its illiquid assets. But the deal had a lot of sense. If it doesn’t go ahead, I think it would be a shame,” he added.
Earlier this month, BNP said a revised deal to buy the Fortis assets would no longer boost its key capital ratio. It also maintained it did not plan a capital increase.
Fortis Chief Executive Karel De Boeck told reporters the group could end up with a large share of toxic assets if BNP withdrew, forcing it to borrow large sums from the state.
Investor groups had accused the Belgian government and Fortis of exaggerating the downside of a “no” vote. However, the largest shareholder, Chinese insurer Ping An, with a 4.99 percent stake, had pledged to vote against.
In the charged meeting, some shareholders called for De Boeck to resign. The latter inadvertently raised a cheer when he told one investor he was “not competent” to answer a question.
Hessels also came in for criticism.
Under the original terms of the October carve-up, Fortis would have held a mixed bag of international insurance activities and a majority stake in a portfolio of toxic assets.
A court ruling in December freezing the transactions led to a revision of the terms last month, leaving Fortis with a majority of the Belgian insurance business and a limit of 1 billion euros’ exposure to the toxic products.
Renewed hope that Fortis might survive as an insurance company has pushed Fortis shares above 1 euro from a November 21 low of 0.5680 euros, but many Belgian families have held the stock for generations and are mindful that it neared 30 euros before the ill-fated joint bid for Dutch rival ABN AMRO.
The shares closed at 1.32 euros on Tuesday and were suspended until after the voting.
Additional reporting by Bate Felix in Brussels, Julien Ponthus, Sudip Kar-Gupta, Juliette Rouillon in Paris, Gilbert Kreijger in Amsterdam; Writing by Philip Blenkinsop; Editing by Erica Billingham and Andrew Macdonald