Fillon's SocGen Barricades Prompt Europe Officials to Cry Foul

(Bloomberg) -- As French politicians go to the barricades to keep foreign banks from preying on a vulnerable Societe Generale SA, their European partners are left wondering just who the enemy is.

Days after France's second-largest bank announced that unauthorized bets left it with a trading loss of 4.9 billion euros ($7.2 billion), politicians led by Prime Minister Francois Fillon jumped in to preempt a non-French takeover bid.

Such economic nationalism in a country whose companies remain among the most acquisitive in the region has other Europeans crying foul. In the past year, French firms announced 317 deals in Western Europe, outside France, valued at $89.2 billion, according to Bloomberg data. In the same period, Western European businesses initiated 286 deals in France for $67.2 billion.

Whenever a potential acquisition is considered politically important, ``it is always seen in Paris as the French versus the non-French,'' says Daniel Gros, director of the Brussels-based Center for European Policy Studies. ``There is no European solidarity.''

Jean-Claude Juncker, the Luxembourg prime minister and finance minister who heads a group of his euro-area finance counterparts, said he can understand blocking a hostile bid.

``But if someone friendly comes forward with a strong economic project, why refuse it?'' he asked on Europe1 radio Jan. 31. ``Simply because it is not French?''

`Great French Bank'

Fillon, 53, provided an answer in remarks to Parliament Jan. 29. ``Societe Generale is a great French bank and will remain a great French bank,'' he said.

That sentiment is widely held.

``For the French, it is extremely important that one of our oldest banks, with a 140-year history, which was founded by its employees, not by a family, which has never been subsidized by the state, remain in French hands,'' says Patrice Leclerc, head of Societe Generale's employee-shareholders' association.

The protectionist instinct is deep-seated and draws from a political tradition that dates back to the 17th century mercantilist policies of Jean-Baptiste Colbert, Louis XIV's finance minister. Colbert established a protective system of tariffs, preventing foreigners from trading in French colonies.

All countries seek to protect strategic industries, as the U.S. did in 2005 when it blocked the sale of California-based oil company Unocal Corp. to Chinese oil producer Cnooc Ltd.

Special Protection

France's definition, though, is wider than most: In July 2005, rumors of a takeover of Groupe Danone SA, the world's largest yogurt maker, by Purchase, New York-based PepsiCo Inc. set off a national uproar. Then-President Jacques Chirac called for special measures ``to protect our key companies.'' PepsiCo, the world's second-largest maker of snacks and beverages, never made a formal bid.

``France is not unique,'' says Juan Delgado, a fellow at Breugel, a Brussels-based research institute. ``It is just that the French are noisier and more blatant.''

One explanation is the size of the French government's stake in the economy. It owns more than 80 percent each of Paris-based Gaz de France SA, owner of Europe's largest natural- gas network, and Electricite de France SA, the region's biggest power generator.

``There is often no clear division in France between the political and the economic, between a company's strategy and that of the state,'' Delgado says. While EDF frequently makes acquisitions outside France, no foreign company would be able to buy it because of the government's stake, he says.

 

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