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Fortis Group for Sale or Naionalization?

By Amarendra Bhushan for CEOWORLD Magazine Updated:October 5, 2008

The nationalisation of the Dutch based activities of of the Fortis Group is approved for the time being. This is what European Commissioner for Competition Neelie Kroes said on Sunday morning on national television. Kroes stated the “nationalisation will influence the Dutch market”. She insists on an independent board for the new bank. The Dutch government took full control of the Dutch parts of the troubled group, including ABN-Amro, last Friday after an earlier rescue plan collapsed. Last weekend The Netherlands, Belgium and Luxembourg took a 49 percent share in Fortis Group and invested a total of 11.2 billion euros. According to Dutch minister of Finance Wouter Bos The Netherlands bought “the healthy part of the Group ands secured it from being infected by less healthier parts”. A statement which took away all the trust from Belgium consumers. In the meantime the Belgium prime minster Leterme tries to comfort (NL) customers and employers of Fortis. Last Tuesday 20 billion euros was pulled out of the Belgium bank, according to RTL Z, a Dutch Financial channel.

Belgium and Luxembourg scrambled on Saturday to find a buyer for the remains of troubled financial group Fortis and mulled a further nationalization after the Netherlands took over its Dutch units. he break-up of the cross-border banking and insurance group, less than a week after a first rescue attempt in which the three governments injected 11.2 billion euros ($15.4 billion), highlighted the ferocity with which the global crisis has swept into Europe.

Luxembourg’s economy minister said French bank BNP Paribas was one possible bidder for parts of Fortis and a solution had to be found by the end of the weekend. “BNP Paribas is one among many possibilities,” Jeannot Krecke told Luxembourg’s RTL radio station. “Now we have to return to the solution we were looking at last Sunday, that is to find a strong partner because the Belgian government is the main shareholder of Fortis Luxembourg and that situation will be remedied this weekend.” The Dutch government bought the banking and insurance units of Fortis in the Netherlands on Friday for 16.8 billion euros, including most of Dutch bank ABN AMRO, after depositors and lenders fled the bank. The second bailout in six days came on the eve of Saturday’s Paris summit of the leaders of Europe’s four major powers with the heads of European Union financial institutions to seek a common response to the credit crisis.

Belgian Prime Minister Yves Leterme said that he hopes to find a new owner for troubled bank Fortis NV and restore confidence in the company before markets open Monday. Leterme told two media outlets on Sunday that government officials were going over a takeover bid for Fortis’ Belgian operations, which remain
a major concern for shareholders and investors. The bank has been caught up in the financial credit crisis and has faced weeks of plummeting stock values amid fears it would go insolvent. Broadcaster RTBF, citing sources close to the negotiations, reported that French banking giant BNP Paribas would take an 80 percent stake in Fortis, while the other 20 percent of shares would be controlled by the Belgian and Luxembourg governments. Government officials did not confirm the report. he Dutch government has agreed to acquire ABN Amro Diamond Bank, the largest lender to the diamond industry, as part of its investment in Fortis Bank Nederland Holding N.V. The government said on Friday that it would buy Fortis Bank Nederland, including most of the bank’s ABN Amro holdings, for EUR 16.8 billion.

Fortis partnered with Royal Bank of Scotland and Banco Santander to buy ABN Amro for about $101 billion last year, splitting ABN Amro’s assets between them, the diamond unit going to Fortis. As a result, Fortis provides an estimated $3 billion of credit to the diamond industry through its ABN Amro subsidiary, according to RBC Capital Markets. The deal replaces the Dutch government’s previously announced investment of EUR 4 billion in Fortis Bank Nederland, in which Fortis was required to divest from ABN Amro. As part of that initial deal, the governments of Luxembourg and Belgium have agreed to take over the Fortis operations in their respective countries. The collapse of Fortis was another sign that the credit crisis in the United States had hit European banks and further raised liquidity concerns in the diamond industry. The nationalization of Fortis was seen as a sign of increased efforts by European governments to address the crisis.

“We have given provisional approval to last week’s deal by the Belgian, Luxembourg and Dutch governments,” said Jonathan Todd, spokesman for EU Competition Commissioner Neelie Kroes. Under the hastily arranged rescue, Belgium made the biggest contribution, taking a 49 percent stake in the Belgian arm of the company, Fortis Bank NV/SA, for 4.7 billion euros. The Dutch government took a 49 percent stake in the Dutch arm, Fortis Bank Nederland Holding, for 4.0 billion euros. On Friday the Dutch government announced it was taking over the Dutch arm of Fortis entirely. This operation, Todd said, may not need any EU approval. “The fact that a country has taken a 100 percent share, doesn’t need EU permission..” Mr Leterme told two media outlets that government officials are going over a takeover bid for Fortis’ Belgian operations, which remain a major concern for shareholders and investors. The bank has been caught up in the financial credit crisis and its stock has plunged amid fears it would go insolvent.

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