The battle for control of three of France's top banks turned into a free-for-all Wednesday after French government efforts to arrange a friendly merger collapsed.
Analysts said it is impossible to predict whether Banque Nationale de Paris' $38 billion bid for Societe Generale and Groupe Paribas will succeed or a separate $18 billion bid by Societe Generale for Paribas will win out.
"It's a mess," said one Paris-based banking analyst who asked not to be identified, "but everyone knew from the day BNP made its bid for the other two that it was going to be a mess."
A merger of the three companies would create the world's biggest bank, with $1 trillion of assets.
The French government, through Bank of France, had tried to work out a compromise among the three, but gave up Wednesday after concluding that no compromise is possible.
Now investors will decide.
Changing its previous position, the French government is expected to let Societe Generale increase its bid for Paribas.
Shareholders have until July 21 to respond to the Banque Nationale offer, and French regulators are expected to set a similar closing date for the Societe Generale bid for Paribas.
Banque Nationale has offered $179.50 for each Societe Generale share, roughly a 1% premium. Societe Generale, in turn, has offered $120.75 per Paribas shares, about a 7% premium, compared with Banque Nationale's offer of $113.75 for each Paribas share, or a premium of around 2%.
The key is whether Societe Generale's shareholders will back Banque Nationale's bid. Thirty-five percent of Societe Generale's shareholders have said they will reject Banque Nationale's bid. They include Societe Generale's employees, who control 10.23% of the voting rights, and large French corporations.
French analysts said it is becoming increasingly likely that Banque Nationale will get less than a 35% stake in Societe Generale.
If that happens, they added, it is not at all certain the government will let the Banque Nationale bid go through.