Court restricts investor voting in Fortis sale

Fortis Bank’s proposed sale to BNP Paribas faced renewed uncertainty on Tuesday after a Belgian court restricted the pool of shareholders entitled to vote on the sale to a faction that rejected a similar deal in February.

The ruling was dismissed as “a joke” by Karel De Boeck, the chief executive of Fortis Holding, the Belgian bank’s parent company that on Tuesday unveiled a €28bn ($37bn) loss for 2008.

“There are a number of people who are underestimating the damage that is being done here,” Mr De Boeck said, referring to the ruling. “Meanwhile, we don’t do what we are meant to do, which is run operational companies.”

Both the record loss and the shareholder vote are linked to Fortis’s part in the calamitous takeover of ABN Amro, the Dutch bank, for €71bn just as markets soured in late 2007.

The ensuing solvency crisis led to Fortis’s banking assets being in effect nationalised last October as part of a multi-state bail-out. Red ink linked to those hurried transactions accounts for €27.4bn of Fortis’s losses, with financing costs adding €629m.

Those figures partly assume the sale of the Belgian banking operations goes through in accordance with a deal agreed three weeks ago by BNP and the Belgian government, which is trying to rid itself of the bank. Fortis Holding shareholders would now need to agree to the sale, thereby approving the nationalisation on October 14.

A previous deal was foiled in February, after a judge declared that only shareholders on the register in October had the right to consider the deal. Executives on all sides, including Baudoin Prot, BNP’s chief executive, had asserted that all shareholders now on the register would be allowed to vote on the new proposal.

“It’s a victory for the rule of law,” Mischael Modrikamen, a lawyer leading the smallholders’ revolt, told the FT. “BNP and the [Belgian] government are trying to serve up the same dish that was sent back last time.”

The so-called October group of shareholders is seen as far more sceptical of the rapprochement with BNP, favouring a stand-alone version of Fortis Bank.

Analysts dismiss the stand-alone option as wishful thinking by disillusioned retail shareholders, upset at having lost 95 per cent of their money because of the plummeting share price.

Some investors who abstained in the earlier vote have declared themselves tentatively in favour of a tie-up with BNP.

But the support of Ping An, the Chinese insurer which is Fortis Holding’s largest shareholder with about 5 per cent is now seen as essential to the proposal being passed.

Ping An cast its vote against the deal in February. It could not be reached for comment on Tuesday

BNP said: “We continue to be determined and confident for the future”.

The voting will take place on April 8 and 9 in Utrecht and Brussels respectively. On April 10 the full set of company accounts is to be released, including details of executive compensation.

Mr De Boeck dismissed local press reports that Jean-Paul Votron, the chief executive who oversaw the downfall of the group before being ousted last July, was in line for a €6.3m pay-out.

Shares in Fortis closed fractionally up at €1.35. BNP closed up €1.50 at €30.64.

Additional reporting by Scheherazade Daneshkhu in Paris