French state to take 20 pct stake in new bank

25th February 2009, Comments 0 comments

The state will probably take 20-percent stake in the new bank formed from the merger of Caisse d'Epargne and Banque Populaire, reveal a source from the president’s office.

PARIS – The French state is likely to take a 20-percent stake in a major bank to be formed from the fusion of lenders Caisse d'Epargne and Banque Populaire, a source in the president's office said on Tuesday.

The state will "probably" take 20 percent of the company initially in the form of so-called preference shares which may be converted into regular shares later, the source said.

Preference shares are stocks which pay a fixed dividend and take precedence over those held by regular shareholders, but which do not give the holder voting rights in the company.

The French state will "put up money, get repaid and afterwards transform these shares into regular shares when the time comes," the source said.

Caisse d'Epargne and Banque Populaire are expected to announce this week a merger creating France's second-biggest bank, according to the government. Experts have predicted the two banks will announce record losses.

The sides began negotiations in November after approving merger plans in October.

In October, Caisse d'Epargne said the two would have combined equity capital of EUR 40 billion.

They had been discussing a possible merger for two years but were forced into action by the financial meltdown rattling the European banking sector.

Banque Populaire and Caisse d'Epargne are mutual banks, partly owned by their depositors, and already jointly control the investment bank Natixis, whose shares have been ravaged by the credit crunch.

AFP / Expatica

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