SocGen Shares Soar After Credit Agricole Seeks Advice On Break-up Bid

Shares in Société Générale, the French bank battered by a rogue trader scandal, surged yesterday as Crédit Agricole, its rival French bank, sought advisers to examine how it might take part in a break-up bid.

Crédit Agricole, Frances largest bank by branch network and third-biggest by value, was in talks with Lazard, the investment bank, about providing advice, although no formal mandate had been signed.

Crédit Agricoles own advisers at Calyon, the in-house investment bank, were also on standby to offer help.

Although Crédit Agricole has ruled out making a standalone bid for the larger SocGen, it would be interested in its wholesale banking operation, according to one source.

A purchase of the retail operations would be blocked on competition grounds.

The bid speculation boosted SocGens market value yesterday by 2.4 billion to €41.1 billion as its shares rose 5.8 per cent to €87.99.

BNP Paribas has already expressed an interest in SocGen. Any bidder would have to offer considerably more than the present price to win control of the business.

Nine months ago, before the credit crunch hit banking shares, SocGen was valued at €73billion.

SocGen has been seen as vulnerable since admitting last month that it had lost €4.8 billion when unauthorised bets on European share markets by one of its traders, Jérôme Kerviel, spriralled out of control.

However, the bank has committed to continued independence.

Crédit Agricole, which looked at bidding for Alliance & Leicester two years ago, has been an aggressive acquirer in recent years.

Its preferred advisers, Rothschild and Morgan Stanley, have been signed up by SocGen.

Six years ago Lazard was on the opposing side to Crédit Agricole when it advised BNP in its attempt to spoil Agricoles purchase of Crédit Lyonnais.

Crédit Agricole, by its own estimates, has 28 per cent of the French retail banking market, while SocGen has 10 per cent and BNP 8 per cent.

One outcome that could bypass competition obstacles would be for Agricole to take SocGens investment banking unit, with BNP picking up the retail side.

All large European banks are almost certain to seek mergers advice without necessarily being serious. HSBC, Santander and BBVA, of Spain, and UniCredito, of Italy, have all been mooted as possible outside bidders.

The French Government appeared yesterday to soften its public stance on any foreign bid for SocGen.

François Fillon, the Prime Minister, said: “The Government has no preference.”

This week he had said that SocGen should remain a “great French bank”.

“The Government has not vetoed anything,” Mr Fillon said yesterday.

“It does not have the possibility to do so. It is simply indicating its interest and its determination to ensure that the employees interests, our countrys economic interests, are preserved.”

A French court is to hold a hearing next week on whether Mr Kerviel should be held in custody during a police inquiry into the affair.

He was charged on Monday with breach of trust, falsifying documents and unauth-orised computer access and released.

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