Shares of Societe Generale, the French bank buffeted by a trading loss of 4.9 billion euros (US$7.2 billion), fell 7 percent on Wednesday after a rival bank, BNP Paribas, confirmed that it had no plans to try a takeover.
Speculation that BNP Paribas might bid for Societe Generale had simmered for weeks after the disclosure in January that a trader, Jerome Kerviel, had exposed Societe Generale to nearly 50 billion euros of risk through a series of unauthorized speculative bets.
"BNP Paribas clarifies that it has ceased to study the possibility of a tie-up with Societe Generale," BNP Paribas said in a statement, adding that the conditions that would have allowed it "to realize a shareholder-value-creating merger, are not met."
Shares of Societe Generale closed on Wednesday in Paris at 62.44 euros, down 4.75 euros.
BNP Paribas said in late January that it was studying a bid for Societe Generale. The declaration on Wednesday means that, according to French market rules, BNP Paribas is barred from making an offer for at least six months -- dashing hopes of speculators who had been anticipating a possible bidding war.
A person with knowledge of BNP Paribas' merger deliberations said the bank was not interested in any deal that would be perceived as hostile by management at Societe Generale.
"Societe Generale has made very clear that it prefers to be independent," said the person, who requested anonymity because he was not authorized to comment. The bank was "reluctant to enter into a deal on anything other than a friendly basis."
Societe Generale's beleaguered chairman and chief executive, Daniel Bouton, has succeeded in fending off mergers since taking the helm in 1997.
In 1999, Bouton thwarted a move by BNP to forge a three-way combination with Paribas. When speculation of an alliance with UniCredit mounted last spring, analysts say Bouton once again resisted.
BNP Paribas was seen by many analysts as a natural buyer for Societe Generale. But several other European financial powerhouses, including BBVA of Spain and HSBC Holdings of Britain, were also considered potential bidders.
"As a French bank, they are very well placed to evaluate the market and they have decided that it doesn't make sense in this environment," Ion-Marc Valahu, head of trading at Amas Bank in Geneva, said of BNP Paribas. "If they don't see the logic, then it's unlikely that anyone else will either."
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