BRUSSELS, Dec 15 (Reuters) - The appeal court in Brussels ruled late on Friday that the break-up of stricken financial group Fortis be suspended and ordered that shareholders be given a say.
Here are the possible next steps in the matter:
BELGIAN STATE APPEALS
The Belgian government is exploring possible responses. Prime Minister Yves Leterme has mentioned two legal options which he deems most likely:
- Taking the case to the Supreme Court. The government would need to demonstrate a procedural error by the appeal court. One mooted by Belgian media is that only two of the three appeal court judges signed the ruling, the other being sick. A Supreme Court ruling could prolong the case by a further six months. The appeal court decision was unexpected, so it is hard to predict what another court might decide.
-Reopening the case as an affected third party. The Belgian state, which was not a party in the case, could claim to be an affected third party as it faces a potential 5 billion euro ($6.7 billion) fine to the appellants if it proceeds with its sale of Fortis assets to BNP Paribas. Lawyers for shareholders argue the state was represented through public holding entity SFPI. However, the case would return to the same appeals court, possibly making this unattractive for the Belgian government.
DEAL(S) RENEGOTIATED
A team of five experts will look into whether deals were carried out correctly and whether shareholders were fairly treated. It is set to issue a preliminary report before shareholders meet to review the deals by Feb. 12.
It may challenge the prices paid by the Dutch state and BNP Paribas, which says it is still interested. Both are widely believed to have secured assets cheaply.
The appeals court judgment refers to all the transactions agreed in the period Oct. 3-6 -- the Dutch seizure of Dutch businesses for 16.8 billion euros, the Belgian state's purchase of Fortis Bank Belgium and its subsequent sale of a majority stake to BNP Paribas.
The Dutch and Belgian state purchases have already been concluded, but the sale of assets to BNP has not been completed and appears to be the transaction under greatest doubt.
The Dutch and Luxembourg governments, also involved in the sale of assets to BNP, have said they believe their deals are not affected by the judgment. The Dutch argue their sale was conducted according to Dutch law, while Luxembourg is not mentioned in the ruling.
However, there are no obvious would-be buyers other than BNP and, while the Belgian and Dutch states are unlikely to back out, they could argue that their intervention prevented Fortis going under.
Furthermore, Fortis shares had lost most of their value before the states stepped in. The shares, which almost hit 30 euros in April 2007 before the ill-fated bid for Dutch rival ABN AMRO, were trading around at 5.40 euros ahead of the intervention. They have since been trading below 1 euro.
Petercam analyst Marc Debrouwer argues that the transfer of banking activities to an industrial partner was the only viable option and that other bidders are scarce.
'The task for shareholders will be tough. They might get a slightly better deal, but it will not be a huge difference.'
SHAREHOLDERS VOTE ON EXISTING DEALS
Shareholders are to be allowed a vote on the transactions at a meeting due by Feb. 12.
With the value of their holdings so low, the shareholders arguably have little to lose in blocking the sales. At meetings earlier this month, in an expression of their anger, they prevented a proposed chairman being elected.
The Belgian state, aware that the bank is the largest private-sector employer and holder of many Belgian savings, may not wish it to get as far as this.
(Reporting by Philip Blenkinsop; Editing by Hans Peters) ($1=.7426 euro) Keywords: FORTIS/ (philip.blenkinsop@thomsonreuters.com; +32 2 287 6838; Reuters messaging: philip.blenkinsop.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
Here are the possible next steps in the matter:
BELGIAN STATE APPEALS
The Belgian government is exploring possible responses. Prime Minister Yves Leterme has mentioned two legal options which he deems most likely:
- Taking the case to the Supreme Court. The government would need to demonstrate a procedural error by the appeal court. One mooted by Belgian media is that only two of the three appeal court judges signed the ruling, the other being sick. A Supreme Court ruling could prolong the case by a further six months. The appeal court decision was unexpected, so it is hard to predict what another court might decide.
-Reopening the case as an affected third party. The Belgian state, which was not a party in the case, could claim to be an affected third party as it faces a potential 5 billion euro ($6.7 billion) fine to the appellants if it proceeds with its sale of Fortis assets to BNP Paribas. Lawyers for shareholders argue the state was represented through public holding entity SFPI. However, the case would return to the same appeals court, possibly making this unattractive for the Belgian government.
DEAL(S) RENEGOTIATED
A team of five experts will look into whether deals were carried out correctly and whether shareholders were fairly treated. It is set to issue a preliminary report before shareholders meet to review the deals by Feb. 12.
It may challenge the prices paid by the Dutch state and BNP Paribas, which says it is still interested. Both are widely believed to have secured assets cheaply.
The appeals court judgment refers to all the transactions agreed in the period Oct. 3-6 -- the Dutch seizure of Dutch businesses for 16.8 billion euros, the Belgian state's purchase of Fortis Bank Belgium and its subsequent sale of a majority stake to BNP Paribas.
The Dutch and Belgian state purchases have already been concluded, but the sale of assets to BNP has not been completed and appears to be the transaction under greatest doubt.
The Dutch and Luxembourg governments, also involved in the sale of assets to BNP, have said they believe their deals are not affected by the judgment. The Dutch argue their sale was conducted according to Dutch law, while Luxembourg is not mentioned in the ruling.
However, there are no obvious would-be buyers other than BNP and, while the Belgian and Dutch states are unlikely to back out, they could argue that their intervention prevented Fortis going under.
Furthermore, Fortis shares had lost most of their value before the states stepped in. The shares, which almost hit 30 euros in April 2007 before the ill-fated bid for Dutch rival ABN AMRO, were trading around at 5.40 euros ahead of the intervention. They have since been trading below 1 euro.
Petercam analyst Marc Debrouwer argues that the transfer of banking activities to an industrial partner was the only viable option and that other bidders are scarce.
'The task for shareholders will be tough. They might get a slightly better deal, but it will not be a huge difference.'
SHAREHOLDERS VOTE ON EXISTING DEALS
Shareholders are to be allowed a vote on the transactions at a meeting due by Feb. 12.
With the value of their holdings so low, the shareholders arguably have little to lose in blocking the sales. At meetings earlier this month, in an expression of their anger, they prevented a proposed chairman being elected.
The Belgian state, aware that the bank is the largest private-sector employer and holder of many Belgian savings, may not wish it to get as far as this.
(Reporting by Philip Blenkinsop; Editing by Hans Peters) ($1=.7426 euro) Keywords: FORTIS/ (philip.blenkinsop@thomsonreuters.com; +32 2 287 6838; Reuters messaging: philip.blenkinsop.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.