Should Société Générale be acquired? Naturally, the answer to this will still require some answers from SocGen itself together with the French regulators, but in any other country than France, the answer would be a resounding ‘yes.’
Look no further than Bankers Trust in the US who had several lawsuits and a declining franchise due to the activity of just one or two departments in derivatives and bond trading; the US Federal Reserve apparently told Bankers Trust in the late 1990’s that they needed to find a buyer, and ultimately Deutsche Bank came to their rescue.
Yet France is unique in trying to save what it considers French assets. You need look no further than the previous attempts by foreign banks (even including German banks during the period when France and Germany in the 1990’s were very close) to buy French banks; or the famed rejection of a foreign bidder for Danone (the yoghourt makers) on national security grounds.
The most natural bidder from the French perspective would be BNP or Credit Agricole, but this would have concentration problems that even the French might not be able to overcome. It is unlikely the French would allow a British or American buyer — although if one came in as an investor to shore up SocGen, then I am sure the French would welcome the cash. (KKR is rumoured to be considering this, as are various sovereign wealth funds who have ridden to the rescue of the American banks that were hit by the recent credit and liquidity crisis.)
How about Grupo Santander, who have concentrated their banking empire in the Iberian Peninsula and Latin America but have done very well with their purchase of Abbey National in the UK in November 2004. Abbey were damaged goods. SocGen is as well. But both had franchises — including loyal customer bases — that were significant assets. Emilio Botín, the chairman of Santander, has not made as splashy an acquisition since then. SocGen fits the bill. And Santander appears to be relatively unscathed by the credit problems of other banks, so has the wherewithal to do the deal.
There’s rumours of HSBC looking at SocGen as well. They, too, would have the ability to do the deal if approved.
One final comment: SocGen shareholders should be grateful for all of the rumours of takeover, as it is propping up their share price. Otherwise, given the size of the losses and the distraction impact (both on employees — who must all have their CVs out to other firms — and clients — who would find it hard to recommend SocGen over competitors at this moment), the share price should have plummeted.
Posted by Scott Moeller on his Intelligent Mergers blog, Friday 1st February