Fortis Misinformation Claims Haunt Ageas Six Years LaterMaud van Gaal and John Martens
Ageas SA, the Belgian insurer that emerged from the 2008 collapse of Fortis, is still haunted by the handling of its predecessor’s government rescue.
Shares of Ageas, the majority owner of Belgium’s biggest life insurer, tumbled for a second day in Brussels trading after a Dutch court yesterday said Fortis misled investors during the bailout operation almost six years ago, paving the way for damages claims.
The Amsterdam Appeals Court ruled that Fortis is liable for misleading investors by saying the firm was “financially stronger than ever” after a government bailout on Sept. 28, 2008, only to be replaced by a break-up plan five days later.
Ageas fell as much as 9.8 percent today, after dropping 7.6 percent yesterday. That’s the steepest two-day slide in more than four years.
The Brussels-based company has been ensnared in court cases since emerging from the breakup of Fortis in 2009. In its first-quarter earnings report in May, Ageas mentions more than 10 cases in Belgium and the Netherlands that relate to Fortis’s actions from its 2007 takeover of parts of ABN Amro Holding NV to the Belgian company’s collapse and government-led split in 2008.
The Amsterdam court demonstrated “that miscommunication could lead to financial indemnification from Ageas,” Benoit Petrarque, an Amsterdam-based analyst at Kepler Cheuvreux, said in a note today. “We think the performance of the stock is likely to remain impacted by the legal uncertainties.”
Ageas fell 7.3 percent to 25.765 euros at 1:22 p.m. in Brussels, cutting its market value to 5.95 billion euros ($8 billion).
The company has to compensate damages suffered by the claimants, including Stichting FortisEffect, a foundation representing several investors, with interest from Oct. 3, 2008, according to yesterday’s ruling. The investors may have decided to hang on or buy Fortis shares after comments by the firm’s executives after the first bailout, the court said.
The amount of damages is to be determined in separate proceedings, the court said. The ruling can be appealed at the Supreme Court.
Ageas is “disappointed” with the court’s decision and will further analyze the ruling and decide “on any appropriate action in this respect,” according to a statement yesterday.
Kepler Cheuvreux’s Petrarque cut his recommendation on Ageas to hold from buy. KBC Securities cut its price target to 38 euros from 40.40 euros as it increased its estimate for litigation costs to 1 billion euros from 500 million euros seen previously.
Ageas should be able to meet a worst-case liability of 2.5 billion euros before taxes possibly stemming from the ruling, Matthias De Wit, a Brussels-based analyst at KBC, said in a note today. Still, potential indirect effects shouldn’t be ignored, he said.
The ruling “creates new uncertainties as it provides ammunition to the claimants in other court cases against the group,” De Wit said.