French regulators have quashed Banque Nationale de Paris SA's effort to control a significant stake in Societe Generale, ending Banque Nationale's bid to create the world's largest bank through a consolidation of three French banks with more than $1 trillion of assets combined.
In a statement issued after a charged 11-hour meeting on Saturday, Bank of France Governor Jean-Claude Trichet said BNP failed to show that its 37.1% stake and 31.8% of voting rights, acquired in recent weeks, would give it control of Societe Generale.
By effectively giving Societe Generale its independence, French regulators surprised many observers who had predicted that the government would come down squarely on the side of BNP. The basis of those predictions was a conviction that the best way to keep France's commercial banks in French hands would be to create a bank so big that no outsider could afford to buy it.
The decision appears to have ended a bitter six-month takeover battle in which BNP sought to acquire majority stakes in Societe Generale and Paribas. BNP gained 65% control over Paribas but slightly less than the 33% stake in Societe Generale it needed to complete the three-way deal.
In a statement on the ruling, BNP said its representatives at the Saturday meeting made "numerous proposals" but were rejected.
With its purchase of Paribas, BNP will become the world's third-biggest bank. BNP had sought to compete by building a huge and highly profitable domestic business, paying scant attention to investment banking and the global scene.
The company said it will now focus exclusively on integrating Paribas into BNP.
Societe Generale had adamantly opposed the merger.
Before BNP's takeover attempt, $450 billion-asset Societe Generale was poised to build a global powerhouse that would provide a full range of financial services, including investment banking, to the world's biggest corporations.
At one point last week, hundreds of Societe Generale employees protested the proposed takeover by marching in the Paris streets.