Third Time Lucky for Fortis and BNP?

A new package put together by the Belgian government could finally seal a takeover of troubled Fortis Bank by France's BNP Paribas

The latest proposals for BNP Paribas (BNPP.PA) to buy the ailing Fortis banking operations could prove to be third time lucky in securing shareholder approval.

The new package put together by the Belgian government raises the net asset value of the deal by €510m (£458m) and the cash position by €1bn, compared with the last version rejected by Fortis (FOR.BE) shareholders in February.

Paribas will take a 75 per cent stake in Fortis Bank, which will itself buy a 25 per cent stake in Fortis Insurance Belgium from Fortis Holding, the former parent company, with financing guaranteed by Paribas.

The plan enables Fortis Holding to continue as an insurance company while the banking businesses in Belgium and Luxembourg go to Paribas, making it the biggest bank in Europe by deposits. Jozef De Mey, the Fortis chairman, is upbeat about the latest plan. "We do feel relatively comfortable that we will get a positive vote on this deal because we can definitely show that, compared to the deal presented to shareholders in February, this one is better," he said.

A deal with Paribas was first tabled last autumn after Fortis's €24.2bn purchase of ABN Amro Holding left it overexposed when the collapse of the Lehman Brothers investment bank caused ructions in world markets. Fortis Holding's banking operations were bailed out and broken up in October by the Dutch, Belgian and Luxembourg governments.

Fortis Bank was nationalised by the Belgian government for €9.4bn, Luxembourg took a 49.9 per cent share of the domestic banking unit in that country and the Netherlands' government bought Fortis's Dutch banking and insurance operations.

But Fortis Holding shareholders, including the Chinese insurer Ping An, have dug their heels in twice over the terms of a deal with Paribas. Under the latest, even more Byzantine version, Paribas is to buy 75 per cent of Fortis Bank and take control of its Luxembourg unit for €2.88bn in stock. A further €1.38bn in cash will buy a 25 per cent of Fortis Insurance.

Some €11.4bn-worth of the most risky assets will be split off into a separate entity, funded by €741m of equity from the Belgian government, €200m from Paribas and €760m from Fortis. Fortis Holding will see its maximum exposure to toxic assets drop from €1bn to €760m, the Belgian government's exposure will drop from €2bn to €740m and Paribas's will fall from €290m to €200m.

The Belgian government will guarantee losses on structured products up to €1.5bn and will also underwrite capital raising of €2bn over the next three years.

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