Fortis vote leaves doubts

Fortis, once Belgium’s biggest bank, was taken over by the government last September after the share price plummeted. A deal was immediately agreed under which Fortis would be taken over by BNP Paribas in return for equity.

But small shareholders, united into two main groups, opposed the sale as it would render their holdings virtually worthless. In addition, it was considered that the value the deal put on Fortis was far too low, especially as BNP’s own shares have come down in price since the deal was signed.

Also at issue is about €10 billion worth of junk credit instruments, which Paribas had agreed to take over. So long as that poisoned package remains with Fortis Bank, the bank’s credit worthiness will never recover. If €7 billion is passed to Fortis Holding, as the government intends, bankruptcy could loom.

The shareholders managed to win a court ruling that their views must be taken into account, which led to a suspension of the sale and to last week’s vote. Their case was bolstered when Ping An, the Chinese insurance company, which, with a 5% stake, is the single largest private shareholder, said it would oppose the BNP Paribas deal.

And so it turned out. The “Yes” camp, which followed the government’s and board’s view, won 49.74% of the vote, and the sale was rejected. As if that tight margin weren’t dramatic enough, it later emerged that the government’s defeat came as the result of a blunder.

The 5,000 or so shareholders who attended the meeting at Heizel to vote in person received a shock as proceedings opened, when they learned that the government intended to use a block of some 125 million of its own shares to vote – despite the fact that these are non-voting shares. That looked like the death-blow to opposition to the BNP Paribas sale. But then, just as surprisingly, the government’s block of votes was withdrawn from the count, apparently as a result of a misunderstanding. The vote went ahead, and the “No” side won narrowly.

The deal’s opponents immediately called for new negotiations with Paribas – which had been their goal all along. They also called for the resignation of Reynders, whose attempt to steamroller the vote had “poisoned” the debate, according to Fortis CEO Karel De Boeck. Reynders is already implicated in the alleged attempt by the government to interfere with the court case brought by shareholders that led to yesterday’s vote – allegations that have already led to the resignations of prime minister Yves Leterme and justice minister Jo Vandeurzen.

Meanwhile, the government is to open new discussions with BNP Paribas, according to Reynders himself, speaking on RTBF television at the weekend. At the same time, the board of Fortis will get together with shareholders’ representatives.