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Buying Spree in Italy by French Banks Hits Shield a la Francaise

Buying Spree in Italy by French Banks Hits Shield
The Italian government said that it may acquire a stake in Parmalat to prevent France’s Lactalis, which bought 29 percent last month, from taking control. Photographer: Giuseppe Aresu/Bloomberg

For French financial companies, a five-year, 22.3 billion-euro ($32 billion) Italian acquisition binge that made Rome and Parma second homes for BNP Paribas SA and Credit Agricole SA may be coming to an end.

Taking a page out of France’s playbook, Italian Finance Minister Giulio Tremonti is seeking to block foreign bids for domestic assets after French cheese maker Groupe Lactalis became the biggest shareholder in March of dairy company Parmalat SpA. Tremonti said his moves are modeled on French measures that protect key domestic assets and create national champions.

“Milk is much less strategic than banking,” said Jerome Forneris, who helps manage $11 billion at Banque Martin Maurel in Marseille and owns shares of Societe Generale SA, France’s third-largest bank by assets. “It’s sure to dissuade a big foreign bank from launching a big operation in Italy.”

Efforts by French banks to buy Pioneer Global Asset Management, a unit of Italy’s biggest lender UniCredit SpA, and Groupama SA’s plan to acquire a stake in a company that controls Italy’s second-largest insurer, may serve as test cases. Italy’s government favored a domestic option for Pioneer, while the markets regulator has halted Groupama’s stake purchase plan.

“Italian capitalism is withdrawing into itself,” said Valerie Cazaban, who helps manage 100 million euros at Stratege Finance in Paris and owns shares in financial companies such as BNP Paribas and Natixis SA. “French banks that entered Italy in the past years reaped a historic opportunity.”

Parmalat Shield

The Italian government said on March 31 that it may acquire a stake in Parmalat to prevent France’s Lactalis, which bought 29 percent last month, from taking control. The decree allowing state purchases is “a law identical to the French one,” so it shouldn’t be questioned by the European Union, Tremonti said on April 2 in Cernobbio, Italy. “Actually, we will write it in French,” he said.

At the height of the financial crisis in October 2008, French President Nicolas Sarkozy created a sovereign fund to invest in companies to keep foreign “predators” away. That was after France approved a bill in 2006 that allows the use of so-called poison pills to deter hostile takeover attempts and make it easier to keep companies in French hands.

In the same year, France arranged the marriage of energy companies Gaz de France SA and Suez SA to ward off a bid for Suez’s Electrabel unit by Italy’s Enel SpA.

France’s power and rail markets remain largely closed to Italian companies, while Electricite de France SA controls about 50 percent of Italy’s No. 2 power company, Edison SpA, and SNCF, France’s state-owned rail operator, bought a 20 percent stake in Italy’s Nuovo Trasporto Viaggiatori, or NTV, in 2008.

Reciprocity Sought

Europe “is based not only on the market, but also on reciprocity,” Tremonti said in a March 27 interview on Rai 3 TV. “We get the impression that in many cases a state like Italy believes in the market while another believes in monopolies.”

French companies are the most acquisitive in Europe with 212 announced deals in Western Europe this year valued at $38.7 billion, according to data compiled by Bloomberg. They unveiled $7.2 billion of Italian purchases, making it their biggest takeover destination outside France. Italian companies have announced 36 deals for $1.5 billion, including one in France.

LVMH Moet Hennessy Louis Vuitton SA, the Paris-based luxury goods maker -- the world’s largest -- said last month it plans to purchase jeweler Bulgari SpA for about 3.7 billion euros.

Since 2006, French financial firms including BNP Paribas, Europe’s largest bank by assets, and Axa SA, Europe’s second-largest insurer, have bought Italian assets with little government opposition.

Fortress France

By contrast, no foreign entity has acquired a major French consumer-banking network since HSBC Holdings Plc’s 11 billion-euro purchase of Credit Commercial de France SA in 2000.

Speculation of a possible takeover of Societe Generale in 2008 by UniCredit was quashed by the French government. Prime Minister Francois Fillon told parliament at the time that “Societe Generale is a great French bank and will remain a great French bank.”

“Governments are often successful in their efforts to intimidate buyers,” said Nicolas Veron, an economist at Bruegel, a Brussels-based economics research group.

Italy’s decision to follow France’s example may make it harder to buy financial assets such as UniCredit’s asset-management unit, although smaller purchases may get a pass, said Banque Martin Maurel’s Forneris.

“If a little regional bank, and there are lots in Italy, became the target of an acquisition, I don’t see the government blocking that,” he said. “With UniCredit or Intesa Sanpaolo, the government would probably use a veto.”

Blocked Bids

UniCredit told bidders for its Pioneer unit -- Natixis, Resolution Ltd. and Amundi, a joint venture of Credit Agricole and Societe Generale -- that it’s abandoning the sale, Il Sole 24 Ore newspaper reported on April 8.

While UniCredit said no decision has been made, the government earlier backed a merger of the unit, which has about 185 billion euros of assets under management, with that of Milan-based Intesa Sanpaolo.

Groupama’s planned purchase of a 17 percent stake in Premafin Finanziaria SpA, which controls insurer Fondiaria-Sai SpA, was halted by the Italian regulator last month.

Consob, the regulator, said accords between Groupama and Premafin’s largest shareholder, the Ligresti family, gives the French company governing control, which triggers a mandatory offer for all of Fondiaria and Premafin. The ruling effectively blocked the deal.

Scarce Capital

French financial companies had it easier before. BNP, France’s biggest bank, and Credit Agricole, the second largest by assets, bought two of Italy’s 10 largest lenders after Former Bank of Italy Governor Antonio Fazio was forced to resign in December 2005. He faces criminal charges over his efforts to block foreign takeovers of Italian banks.

BNP, which acquired Rome-based Banca Nazionale del Lavoro SpA in 2006 for 9 billion euros, has 900 branches in Italy and plans to reach 1,000 by 2013. Credit Agricole operates about 960 branches in Italy. BNP’s 19,000 and Credit Agricole’s 12,000 employees in Italy are the most outside their home market.

Groupama has about 1.7 million insurance clients in Italy after the 1.25 billion-euro purchase of a unit of Assicurazioni Generali SpA in 2007. Axa gained access to 1.8 million clients in Italy in 2007 by buying 50 percent of Banca Monte dei Paschi di Siena SpA’s insurance unit for 1.15 billion euros.

Foreign banks’ ability to make further inroads may be a function of Italian companies’ capital needs, Veron said.

“Capital is scarce, especially for a country that is as indebted as Italy, and nationalizations aren’t efficient,” he said.

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