France, US strike Executive Life deal

11th December 2003, Comments 0 comments

PARIS, Dec 11 (AFP) - France has struck a draft deal with US authorities under which French parties will pay USD 770 million to settle a long-simmering row over the contested purchase of a US insurer by a French bank.

PARIS, Dec 11 (AFP) - France has struck a draft deal with US authorities under which French parties will pay USD 770 million to settle a long-simmering row over the contested purchase of a US insurer by a French bank.

Finance Minister Francis Mer said Thursday an out-of-court settlement was in sight covering the purchase of California insurance company Executive Life by Credit Lyonnais bank a decade ago, a transaction that US authorities say was illegal.

He said on RTL radio that an "agreement in principle" had been reached that should "be finalized by Monday."

The signing of a final agreement will allow France, which had already backed away from two earlier proposed settlements, to avoid a legal battle that could have further tested French-US relations already strained over France's objection to the US-led war in Iraq.

But settlement comes at a hefty cost.

The agreement calls for the French state to shell out USD 475 million (EUR 390.6 million) out of a fine of USD 770 million, with private French parties paying the rest.

But the final bill could come to more than USD 1 billion when taking into account money US authorities are requiring to be put aside pending a civil trial.

Legal action, begun five years ago, arose from the 1993 takeover of the failed California insurer by the Credit Lyonnais, then state-owned, and other French parties.

At the time, banks and foreign governments were barred by law in the United States from owning more than 25 percent of insurers.

After four months of negotiations and missed deadlines for an agreement, the two sides were "on track" to clinch a deal, Prime Minister Jean-Pierre Raffarin said earlier Thursday.

"They are proposing an agreement which is open to all the companies involved in the matter, which is also open to the individuals," Raffarin said.

He did not provide details on the parties.

The settlement "will not cost an additional euro to the state or to France's public finances," he added, in a reference to an initial US proposal rejected by France that had also included a state fine of USD 475 million.

"I had been firmly opposed to a partial agreement that excluded a certain number of parties, which did not guarantee French interests, the interests of public finances at the level demanded by me and which lacked transparency," he said.

Sources earlier said the two sides had reached an agreement overnight on the contested takeover.

The agreement also includes a settlement of claims against French billionaire Francois Pinault, a close friend of President Jacques Chirac, a source said.

Executive Life was eventually acquired by Artemis, a holding company controlled by Pinault, and renamed Aurora.

Commentators and left-wing politicians had suggested that Chirac had intervened to prevent an agreement last week because it did not cover his friend.

Chirac denied that he had personally intervened to squelch the deal.

The new settlement became possible after Pinault agreed that Artemis would pay the
USD 180 million US authorities were seeking from him in earlier proposals, a source close to the matter said.

Another source said Thursday that the French-US agreement was largely in line with a compromise proposed by US authorities but rejected by France on December 2.

An earlier draft agreement, rejected by France in September, called for a fine of
USD 585 million, of which the French government would be responsible for USD 475 million, Credit Lyonnais USD 100 million and the French insurer MAAF, USD 10 million.

Shares in Pinault's group Pinault-Printemps-Redoute were up 3.46 percent at EUR 79.30 on the news in early afternoon Paris trade, on a market 0.54 percent higher.

Shares in bank Credit Agricole, which acquired Credit Lyonnais earlier this year, were up 2.11 percent at EUR 18.43.


 © AFP

                                                                Subject: France news

0 Comments To This Article