As the takeover battle among France's biggest banks moves toward a climax, it appears that the government will get what it wanted-a three-way merger that will create the world's largest bank.
This week, France's central bank gave up its efforts to mediate among Banque Nationale de Paris and the two banks it is trying to buy: Societe Generale and Groupe Paribas. Both target banks are fighting BNP's hostile bid and are seeking to merge with each other.
The government, known for its intervention in business matters, said it would pull out of the talks and let the market resolve the matter. But some analysts saw the central bank's sudden hands-off policy as merely a strategic retreat.
On Thursday, BNP sweetened its offer for its two rivals by $2 billion, to $39 billion. If the offer is accepted by a majority of each bank's shareholders, the months-long battle would be over.
"The odds are now in BNP's favor," said Matthew Czepliewicz, a banking analyst at Salomon Smith Barney in London. "This is a fairly persuasive bid," and odds are that BNP will get more than 60% of the shares, he said.
But it remains uncertain whether even BNP's latest bids will draw enough shares to give it clear-cut control of SocGen and Paribas.
About 27% of SocGen's voting shares are in the hands of its employees and large French corporations. Both groups have vehemently opposed merger with BNP. And Paribas also has large investors, such as Allianz-AGF, the French-German insurance group that holds 8.3% of the company's shares, who are opposed to the potential deal.
In the end, though, "the French government is likely to get its way," said Daniel Davies, an analyst who tracks French banks for Robert Fleming Securities in London. "However it works out, it will require approval from French regulators."
Analysts pointed out that the government has indicated it will not let BNP retain a hostile minority stake in the two banks. And if that were to occur, the stage would be set for renewed negotiations on a three-way merger.
"If BNP winds up with a minority stake, there will be more negotiations to resolve the issue," Mr. Davies said.
"There is a strong body of opinion among investors, regulators, and the French establishment that a three-way merger led by BNP makes the most sense," said Robert Yates, a banking analyst at Fox-Pitt, Kelton in London.
"If it doesn't happen this time, there's a strong likelihood that the issue will come back on the agenda," he said.
Just before the French government intervened, Societe Generale raised its bid for Paribas to $20 billion, from $18 billion. But the government delayed approval of the higher bid in an effort to push through the BNP offer. France quickly approved BNP's initial bid for SocGen and Paribas.
On Thursday, BNP's shares fell 1.74%, to $81.80. Paribas rose 3%, to $115.40, and Societe Generale 2.6%, to $180.70.