The Wall Street Journal-20080201-Deal Journal - Breaking Insight From WSJ-com
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Deal Journal / Breaking Insight From WSJ.com
Full Text (574 words)Will BNP Make
Play for SocGen?
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Deal in 1999 Fell Apart
After Turning Hostile;
Data Make It Look Ripe
In March 1999, Banque Nationale de Paris tried to acquire Societe Generale and Paribas to create the biggest bank in Europe, with $1 trillion in assets. The $37 billion three-way battle left BNP disappointed, Paribas riddled with defections and Societe Generale licking its wounds.
Can what is now called BNP Paribas rewrite history by trying to win SocGen again? The market seems to think so: Investors have sent SocGen's shares on Euronext up to 83.20 euros ($123.81) from 71.05 euros Monday, before a bid was rumored. A BNP Paribas spokesman yesterday said the bank is examining SocGen: "We're thinking about what this means for us."
In 1999, SocGen wanted to combine with Paribas. Instead, BNP muscled in and won the affection of Paribas's shareholders. SocGen refused to participate in a three-way deal and wanted to go it alone instead.
In return, BNP turned hostile: It started a proxy battle to acquire SocGen shares, buying as much as a 37% stake -- giving it 31.8% of the voting rights. BNP thought that was enough to control SocGen. SocGen and French regulators disagreed, and the deal died.
So how does SocGen look now? The bank, which has 956.8 billion euros of assets, would be a smaller bite for an acquirer. Its market value has fallen to 38.79 billion euros from 75.5 billion euros, which was its market capitalization at the 52-week high of 162 euros. BNP has about $1 trillion of assets. SocGen is slightly undervalued. SocGen shares are trading at a price-to-estimated 2009 earnings multiple of 6.8, according to a report from Credit Suisse Group analyst Guillaume Tiberghien, compared with 7.5 for the European banking sector.
Of course, some things never change. Yesterday about 4,000 SocGen employees protested a potential takeover -- as they did in 1999.
-- Heidi Moore
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One Merger Fund
Closes Up Shop
For some "event-driven" hedge funds, 2008 may prove to be downright uneventful.
The Deephaven Event Funds, which buy stocks of companies in the process of being acquired, are closing up shop, according to an SEC filing from parent company Knight Capital Group. (Other funds managed by Deephaven Capital Management, including its flagship fund, which has racked up 17% average annual returns since 1994, will stay in business.) They appear to be the first such casualties in 2008 of the buyout-deal collapse. Don't expect them to be the last. Last year was miserable for such investors, and 2008 has started out even worse, with the Alliance Data Systems deal apparently disintegrating and fear running high that the Clear Channel Communications buyout will, too.
In the past 13 months, the Deephaven funds' assets have fallen by more than $1 billion as investors clamor for their money back. Assets stand at $780 million after flat investment performance in 2007 and the negative 6% return through Jan. 25, a Bloomberg report said.
The funds' lackluster returns couldn't have encouraged investors to stay the course. Some redemptions look to be the result of investors getting fed up with the merger-arbitrage strategy.
For those funds that survive, there may be one silver lining: one persistent complaint of arbitrage investors is that too many of them were chasing the same deals, driving down potential returns. If more funds are put out to pasture, the ones that survive may get more elbow room.
-- Dana Cimilluca
