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Fortis N.V./S.A. (B) / Fortis N.V. (NL)

Type	Public (Euronext: FORA, Euronext: FORB, LuxSE: FOR)
Founded	1990
Headquarters	Brussels, Belgium and Utrecht, the Netherlands
Key people	Filip Dierckx (CEO since 27 September 2008)
Industry	Financial services
Products	Commercial bank Investment bank Insurance
Revenue	€120.5 billion (2007)1
Profit	€4.074 billion (2007)1
Employees	56,866 (2006)
Website	www.fortis.com

Fortis (Euronext: FORA, Euronext: FORB, LuxSE: FOR) is a banking, insurance, and investment management company. In 2007 it was the 20th largest business in the world by revenue², but most of the company was sold in parts in 2008.

The Benelux countries were Fortis' home base and its strength. Fortis' banking operations included network (retail), commercial, and merchant banking; its insurance products included life, health, and property/casualty lines. Products were sold through independent agents and brokers, financial planners, and through Fortis Bank branches. It is listed on the Euronext Brussels, Euronext Amsterdam, and Luxembourg stock exchanges.

The name Fortis is still used by the sold parts. It will continue to be used for Belgian parts sold to BNP Paribas, but in the course of time the name will be abandoned in the Dutch parts.

Contents 1 History 2 Acquisitions 3 ABN AMRO and its aftermath 3.1 Shares 3.1.1 Issuing extra shares 3.1.2 Share value 3.2 Governments step in 3.2.1 Divestment of Dutch assets 3.2.2 Takeover by BNP Paribas 3.3 Fallout 3.3.1 Remaining parts (October 6 - December 12) 3.3.2 Special plan 3.3.3 Legal proceedings 3.3.4 December 1 and 2 meetings of shareholders 3.3.5 The Appeal and its consequences 3.3.6 The December 19 meeting of shareholders 3.3.7 Post-Leterme I developments 4 See also 5 References 6 External links

History

Fortis came into being in 1990, as the result of a merger of AMEV, a large Dutch insurer and VSB, a Dutch Banking Group; these were joined later that same year by AG, a Belgian insurer.

In addition to acquiring a retail bank in Poland, Fortis acquired 89.3% of the shares of Turkey's fifth largest privately owned bank Dışbank from Doğan Group on 11 April 2005. Considering the outstanding public shares, the total bid is approximately €985 million. From 28 November 2005 on, the network of 173 branches of Dışbank were rebranded Fortis.

As of 2006, its profits were €4.56 billion according to Forbes magazine with a market value of €45.74 billion.

Fortis acquired Dryden Wealth Management from Prudential Financial on 4 October 2005.

Fortis Insurance UK has its own in-house worldwide medical emergency service, Assistance International. Fortis is the shirt sponsor of the R.S.C. Anderlecht and Feyenoord Rotterdam football clubs. Fortis is also the main sponsor of the Turkish Football Cup and the Luxembourg National Division.

Acquisitions

• MeesPierson N.V. was acquired in 1996 from ABN AMRO, giving Fortis an instant presence in investment banking
• Algemene Spaar- en Lijfrentekas / Caisse Générale d'Epargne et de Retraite (ASLK/CGER) acquired in 1999 by Fortis
• Générale de Banque / General Bank (Generale Bank/Générale de Banque) was acquired in 1999 by Fortis
• Krediet aan de Nijverheid / Crédit à l'Industrie, (now called Fintro)
• In October 2006, Fortis signed a joint venture with An Post (Irish postal service) to provide financial related services through the An Post network of offices.
• In October 2006, Fortis acquired 100% of Polish retail bank, Dominet, which is full service retail bank with 806 employees and over 125 branches and franchises and is also in strong position in the car finance segment such as car loans.
• Pacific Century Insurance Holdings was acquired in 2007, now called Fortis Insurance Company (Asia) Limited
• On October 8, 2007, a consortium of three European banks, Royal Bank of Scotland Group, Fortis and Banco Santander, announced the acquisition of ABN AMRO. After the split, Fortis would get the retail and business activities in the Benelux and the international investment company; integration of the retail activities into Fortis Bank to be subject to permission of De Nederlandsche Bank (DNB); the business activities to be re-sold because of EU-regulations on market share.
• On October 3, 2008, an announcement was made that the Dutch Government had agreed with the Belgian Government to buy Fortis Bank Nederland, Fortis Verzekeringen Nederland and Fortis Corporate Insurance. On October 5, the Belgian Government announced to have bought Fortis Bank, and to have re-sold 75% of it to BNP Paribas, which also bought Fortis Insurance Belgium. The Government of Luxembourg holds a third part of Fortis Banque Luxembourg. The actual Fortis Group itself remained as a virtual empty shell, holding only Fortis Insurance International, a small company.
• On December 12, 2008, a court decision (see below) made the sales of October 3, 5 and 6 contingent on shareholder approval. Until shareholders decide (at the latest on February 12), the Dutch government holds the parts it bought, Fortis Bank is the property of the Belgium government, while Fortis Insurance Belgium remains with Fortis Group (together with Fortis Insurance International). If shareholders decline to approve the sales, the sales will be illegitimate and actual ownership of the various parts may well become a matter of further negotiations and/or litigation.

ABN AMRO and its aftermath

Fortis was part of the consortium with Royal Bank of Scotland Group (RBS) and Banco Santander, that announced on October 8, 2007, that an offer for 86% of outstanding ABN AMRO stock had been accepted, making way for the largest ever bank takeover in history.[1] On November 1, 2007, an extraordinary shareholder meeting was held to change ABN AMRO's management. Mark Fisher from RBS took over as CEO. At that meeting the consortium stated that 97% of all shares were in their hands.

Fortis would use the ABN AMRO brand name for Fortis's retail banking operations in the Netherlands.

Shares

Issuing extra shares

To finance the purchase Fortis issued extra shares, available to the existing shareholders at a discount, making for the special bargain price of €15 per share.

However, by June 2008, Fortis announced that an international financial crisis was coming and that it needed to fortify its capital by raising an additional € 8.3 billion. An extra 200 million shares were issued at €10, at that time the price of the share, but in the bigger view of things still a bargain; these were placed the same day with large investors.

A major worry was the upcoming future write-off on ABN-AMRO: the price paid included a huge amount for intangibles that could not be put on the balance sheet. The write-off would only occur if and when ABN-AMRO would cease to be an independent bank (on the integration of the retail activities of ABN-AMRO into Fortis), but Fortis would then be in danger of no longer meeting the standards for capital required of banks. Another sore point was the loss on the sale of the business activities; as the sale was forced (because EU regulations) this was not effected at full value: a €300 million loss was reported on the sale. However, it later became known that although Lippens, the chairman of the Supervisory Board of Fortis had claimed to have moved heaven and earth at the EU (only stopping short of taking the EU to court) to get an extension of the time limit so as to gain bargaining space (and a better price) it had not actually applied for an extension. Commisioner Kroes reported there had been no contact whatsoever. Lippens explained that it had been merely a figure of speech.

Share value

The raising of the additional €8.3 billion was effected partly by eliminating the year's dividend, saving €1.5 billion. However, CEO Jean Votron previously had explicitly and repeatedly promised that the dividend would be paid out untouched. This dividend had for decades been one the main selling-points of the Fortis share, which was as safe and reliable an investment as a bank. Eliminating it dismayed the shareholders, and share value dropped from above €12 to just over €10 on June 26 (reducing the value of the company by over €4 billion), followed by a further decline.

In an analysis of December 12, 2008 (six months after the events), Het Financieele Dagblad describes that in drawing up the plan, Fortis had disregarded the effects on the shareholders. When approached, the British and American shareholders were surprised that Fortis needed more money so soon after the earlier share issue: they refused to buy more, feeling that Fortis had proved unreliable. Only some rather unusual shareholders, the Dutch ABP, the Russian Millennium, the Libian LIA and the Chinese Ping An were prepared to buy anew, but demanded a 25% discount and the assurance that further measures were taken. The Belgian shareholders (holding a total of 15% of outstanding shares) were neglected and heard of the plan only after it had been announced. Many of these had contracted loans to pay for the earlier share issue and were counting on the dividend to pay off these loans. They were furious to be surprised. That, by the time the announcement was made that the shares had been placed with large investors at a share price of €10, the share price had actually dropped to €10, negating the discount obtained, was co-incidence³

On July 11, 2008, the CEO of Fortis, Jean Votron, stepped down (reports conflict as to the position of Lippens who was reported to be pressured to step down, but refusing⁴ or offering to step down but yielding graciously to appeals to stay⁵). The total value of Fortis, as reflected by share value, was at that time a third of what it had been before the acquisition, and just under the value it had paid for ABN Amro's Benelux activities alone.⁶ Share price continued to waver below €10. Votron was succeeded as CEO by Herman Verwilst, who after a few weeks held a press conference to introduce himself and to reassure the shareholders that Fortis was solid. He succeeded in making a good impression and share price firmed up. This was helped by the announcement that Maurice Lippens, from the supervisory board, had personally bought a large amount of shares (at just below €9 per share). However as the markets in general declined so did the share price of Fortis.

On Thursday, September 25, 2008, shares plunged to €5.5 (intraday). This was attributed to a rumor that the Rabobank had been asked to help out in Fortis's financial difficulties. When the rumor was denied by both Fortis and Rabobank the shares recovered somewhat. The next day, Fortis put out a press release that since the beginning of 2008, only about 3% of the deposits at the bank had been withdrawn⁷ and the CEO (Verwilst) held a press conference to reassure analysts and stockholders. He did not produce actual figures on the state of affairs, but merely stated that Fortis was solid and that there was no reason at all to believe a bankruptcy was at hand⁸. Shares plunged again (closing at a little over €5). The CEO stepped down that same evening and Filip Dierckx was named as the new CEO⁹¹⁰, to be approved by a shareholder meeting. In one week the shares of Fortis had dropped 35%¹¹ (20% in the final two days).

According to the Fortis's Shareholder Circular of November 20, it was only on Friday, September 26, that liquidity problems began, with large withdrawals by business customers, due to the bankruptcy rumours. According to the November 24 court proceedings of the Ondernemingskamer, on that Friday €20 billion was withdrawn, with an additional withdrawal of €30 billion expected for the following Monday. There were no solvency problems, only liquidity problems.

On Thursday, September 25, Fortis had been summoned by the CBFA to seek a strong partner for help in its problems¹². The government of Luxembourg approached Fortis with an offer of assistance, and Fortis drew up a plan with the governments of Luxembourg and Belgium contributing €2.5 billion and €4.5 billion, for a temporary (one year) 49% share in Fortis Banque Luxembourg and Fortis Bank, respectively. This plan included selling the Dutch ABN-AMRO. Based on this deal, from which the Dutch government was excluded, the Dutch government did not see another choice but to nationalise the Dutch Fortis activities.¹³¹⁴

Governments step in

Fortis then became subject of discussion on an emergency meeting of the Dutch and Belgian minister of finance and financial regulators, and rumours about partial or total takeovers are spread¹¹⁸. It was later reported that other banks had indeed made preliminary take-over bids (ING offering €1.50 per share, and BNP Paribas €2), but these talks were curtailed, as governments took central place¹⁵ Fortis was partially nationalised on September 28, 2008, with the three Benelux countries investing a total of €11.2 billion (US$16.3 billion) in the bank. The initial press releases reported that Belgium, the Netherlands and Luxembourg would invest respectively €4.7 billion, €4 billion and €2.5 billion in the Belgian, Dutch and Luxembourg Fortis Banks. In actuality, Belgium invested its stake into Fortis Bank SA/NV (Fortis's overall banking division) in return for newly issued shares, making up 49% of total outstanding shares in that company, with the Netherlands doing the same for Fortis Bank Nederland (part of Fortis Bank SA/NV). Luxembourg has agreed to a loan convertible into a 49% share of Fortis Banque Luxembourg (also part of Fortis Bank SA/NV).¹⁶ This meant that only a third of the banking division would still be owned by Fortis Group, and that only a third of any future profits by the banking division (including the investment branch) would benefit the shareholder. However, the shareholder would still get the full profits of the insurance division; also, he was assured of the safe continuation of the company.

At the same time, it was announced that plans to integrate the retail activities of ABN AMRO into Fortis had been stopped, and that these activities would be sold. A sale at less than €12 billion would have consequences for the core equity of Fortis (core equity at that moment was reported at €30 billion, or circa €13 per share)¹⁷.

The next day share price first rose, but then plummeted, taking the rest of the market with it (a 'Black Monday'). However, it never dropped all too much below €4; over the rest of the week it recovered, never quite achieving €6; it closed the week at €5.4. Part of the turn-around was caused by the announcement on September 30 by Fortis that Ping An had withdrawn from the collaboration in Fortis Investments; the market welcomed this as a sign that Fortis was now strong enough to handle this alone¹⁸.

According to the Shareholder Circular (of November 20) in this week large withdrawals by business customers continued, causing further liquidity problems. The national banks provided emergency credit (€59 and 7 billion, from the Belgian and Dutch banks, respectively) and this was indeed used, almost to the full extent (€54 and 7 billion, respectively).

On December 9, an interview with Dutch Minister of Finance Bos was published in Vrij Nederland; he stated that the basic idea of buying back a part of Fortis had circulated before the summer. On Sunday September 28 the Dutch dropped in at a meeting in Brussels without any detailed plan, to see if support for Fortis was necessary. When they arrived there was a council of war in progress with the Belgian Prime Minister, the Belgian and French Ministers of Finance, ECB-president Trichet and three Fortis-representatives: plans were at an advanced stage, with exact figures circulating^{19 20}

Divestment of Dutch assets

On October 3, in a press conference (at 18.00h), broadcast live on tv, the Dutch Prime Minister Jan Peter Balkenende, Dutch Minister of Finance Wouter Bos and DNB-president Nout Wellink announced that the Dutch government will purchase the Dutch banking and insurance divisions of Fortis for €16.8 billion ($23.3 billion). The Dutch government will become holder of Fortis Bank Nederland, Fortis Verzekeringen Nederland and Fortis Corporate Insurance, as well as the retail activities of ABN AMRO still held by Fortis.²¹ This was later confirmed by a press release of the Dutch ministry of finance.²². At the same time the Luxembourg government increased its control of its part to 52%. Later, it became known that Luxembourg had also bought parts of the Luxembourg bourse and another Fortis-company for a symbolic price of €1²³.

Initially, the Belgian Prime Minister Leterme welcomed the Dutch (and Luxembourg) take-over as good news for customers, shareholders and personnel, saying that this provided a solid foundation for the future ²⁴.

However, Belgian newspapers reported an immediate widespread Belgian outrage. The Dutch were accused of: 1) not coming through with the promised €4 billion support; 2) orchestrating a withdrawal of funds by Dutch businesses from Fortis Bank Nederland in the previous week, forcing the National Bank of Belgium to come up with €50 billion in emergency credit; 3) cutting off credit lines to Fortis from other banks, notably from ABN-AMRO (owned by Fortis); and 4) threats from the De Nederlandsche Bank. In this way, the Dutch had forced the sale of whatever they wanted, below market value. Also, the wording by Dutch Minister of Finance Bos in his public announcement of October 3 was resented; he had emphasized that the Dutch companies he had bought were quite healthy and had now been safeguarded, which appeared to imply that the problems were all in the Belgian parts of Fortis, which thus were rotten.

In a tv-appearance on Sunday October 5, DNB-president Nout Wellink reminisced on the negotiations, revealing that the Dutch, in the end, had paid more than strict market value, to help out the Belgians. He assured the audience that the remaining (Belgian) part of Fortis was now a very well capitalized company.²⁵

Later, the Dutch media reported that the Dutch, after coming home from the agreement on September 28, were badly upset at the deal they had made. At the time, only a verbal agreement, on broad outlines, had been made and when it became time to put things to paper they realized that their €4 billion was only going to buy them a 50% share in a company they were only mildly interested in (Fortis Bank Nederland, later sold for €5 billion total) and that the Belgians for their €4.7 billion were getting a 50% share in the overall banking holding (including not only Fortis Bank Nederland and Luxembourg, but also Fortis Investments and ABN-AMRO). In addition, it became apparent that the Belgian government had secured additional rights on the Dutch insurance company. Thus, while Dutch Minister of Finance Bos was openly defending the agreement in parliament, he was secretely conferring frantically on a re-negotiation.

This was affirmed later in an analysis by Het Financieele Dagblad, which stated that the Dutch had been left out entirely, until they included themselves in, at a late stage, but at a disadvantage, causing friction and distrust. Fortis management is convinced, in hindsight, that the company could have been saved in its entirety if all three countries had been involved from the start²⁶.

On October 21, the Dutch government announced a future merger between ABN-Amro and Fortis Bank Netherlands to create a "strong Dutch bank". The Dutch insurance division will be sold (see Fortis-ABN AMRO for more information).

Takeover by BNP Paribas

After the announcement on October 3, the Belgian government went into an all-weekend emergency meeting, to confer about Fortis. The purpose stated by the Belgian Prime Minister was to prevent the value of the shares from dropping further and to ensure that Fortis would not be sold cheaply, “niet voor een appel en een ei”, as the Dutch saying goes, “not for an apple and an egg”.

On Sunday evening October 5, 2008, De Tijd reported that French bank BNP Paribas would take a majority stake in Fortis, with the Belgian and Luxembourg governments reduced to minority shareholders with blocking power in exchange for shares in BNP Paribas²⁷. The deal does not include the main holding company, but does include the insurance and banking subsidiaries, except for Fortis Insurance International²⁸²⁹. In more detail, the Belgian government bought the remaining 51% of Fortis Bank SA/NV from Fortis Group for an additional €4.7 billion, split off a portfolio of €10.4 billion in structured products, in which it sold a 66% share back to the Fortis Group (at €6.9 billion) and then sold a 75% share of Fortis Bank SA/NV to BNP Paribas, at an evaluation of €11 billion for the total company, to be paid by shares, making the Belgian government the biggest shareholder in BNP Paribas (at 12%). The initial investment by Belgium (€4.7 billion), and presumably that by Luxembourg (€2.5 billion), and the price paid for the Dutch banking activities (€12.8 billion) remain with Fortis Bank SA/NV, while those received for the insurance companies (€4 billion from the Dutch and €5.73 billion from BNP Paribas) go to Fortis Group. After paying for the 66% share in the portfolio and paying a debt (involving a write-off on ABN AMRO), total cash remaining with the Fortis Group is approximately €100 million³⁰.

According to the Shareholder Circular (of November 20), the Belgian Government in this weekend threatened to disown Fortis Bank outright, paying only a token €1 (total); the Board of Directors felt they had done well to hold out for the €4.7 billion, so as to have a least some shareholder value remaining in Fortis Group. The €20 billion, which was paid into Fortis Bank before and after this weekend, meant that there were no solvency problems, but these were not sure to resolve the liquidity problems, even though the Dutch were going to pay back the emergency credit enjoyed by Fortis Bank Nederland (€50 billion) almost immediately (and did indeed do so).

In an after-the-fact analysis (November 20), De Tijd reports that on Saturday October 4 both Fortis and the Belgian government went into emergency meetings, but separately. Fortis re-calculated what the remaining company could do, and figured it could earn €1.7 to 2 billion annually; a presentation to that effect was put together for the benefit of the government (this was never actually shown). The government, on the other hand, focused on selling to BNP Paribas. Apparently, a major factor in the thinking of the government was the storm raised in the press, on how the Belgians had lost out to the Dutch, and how Belgium had been left with the rotten parts of the company; this led to an atmosphere of defeatism, and they just wanted to be rid of the mess. Negotiations with BNP Paribas did not go smoothly, the French being adamant that they wanted only the banking parts and certainly wanted no part in the risky 'toxic' structured products. Also, they wanted the bank cheaply. Finally, the government caved and agreed to let Fortis Group deal with the 'toxic' structured products (after all, Fortis had caused the problem), while selling only the actual bank to BNP Paribas. They did manage to raise the valuation for the bank somewhat (€11 billion total, which considering the cash just paid into the bank still constituted a minus value of many billions for the actual banking activities). Also, they managed to get a slightly better price for the insurance company³¹.

Dutch and Belgian shareholders' associations have requested a review of the takeover. Dutch law requires shareholder approval for major changes in a company, or its daughter-companies³²³³.

According to the Fortis website, Fortis Bank will be the 100% property of the Belgian government (from October 5) till mid December, at which point a share-swap with BNP Paribas will take place. However, BNP Paribas has already launched a major advertising campaign, in anticipation.

Fallout

On October 6, CBFA, the financial services regulatory authority for Belgium, announced that trade in Fortis shares was put on hold and permission to resume trading will be given after Fortis has published enough information about the remaining assets within Fortis.³⁴

Remaining parts (October 6 - December 12)

What remained in Fortis Group on October 6 was Fortis Insurance International, a company valued in the range of €1 to 2 billion, and the 66% share Fortis had purchased from the Belgian Government in the portfolio put together by the Belgian Government (paid with, as later became apparent, cash loaned by the Belgian Government).

On October 14, Fortis issued a press release stating that its cash position of €10.4 billion was sufficient to meet the €9.5 billion debt left by its component parts, and that an additional 125 million shares had been issued³⁵. Trade in Fortis shares was resumed that same day at 11 a.m., opening at €2 and closing at €1.21 (a 77.77% loss from its previous close).

Data released on 14 november 2008 (for the special, dual meetings of shareholders on December 1 & 2), show Fortis booking a €24.6 billion loss (circa €10 per share) on the sale of its parts³⁶. Shareholder's equity of Fortis Group was stated to have decreased to €3.5 billion per October 31 (less than €1.5 per share)³⁷.

On November 15, the Belgian newspaper De Standaard reported that BNP Paribas had re-opened the negotiations on October 8, and had demanded to decrease the agreed-on price. The reason was an existing convertable loan between Fortis Group and Fortis Bank. In the end the Belgian Government loaned €3 billion to Fortis Group and in return took out a security on the portfolio it had just sold to Fortis Group. Apparently this was the reason for the suspension of the trade in shares, although neither Fortis Group nor the Belgian Government at any point prior to November 15 reported on what was happening or how this affected the value of the assets remaining in the holding³⁸. In response to the press report, Belgian politicians put the blame for the deception squarely with Fortis Group, pointing out that the Government had given out the details, but that the media had not picked up on it (among the welter of operations in support of banks)^{39 40}.

Further renegotiatons were reported on December 10, as the loan to Fortis Bank Nederland by Fortis Bank had been taken over by the Dutch government after the take-over. This resulted in less interests to be paid, and disagreement broke out who this 'bonus' belonged. As this amounted to €0.25 per share (share price at that moment being €0.71) this was of some consequence to the Fortis-holding⁴¹.

Special plan

On October 12, the Belgian government announced a plan to recompense the long-term small shareholder. The profits enjoyed by the Belgian government are to be put in a special fund, which will pay out in 2014.

• Beneficiaries are natural persons, who are EU-citizens, or residents of Belgium, who held shares on October 3, and who applied for this.
• The maximum to be paid out per share is €10 (price of the share on July 1) minus the average price of the share over the five days after trade is resumed (this comes down to a maximum of just less than €9).
• This will be paid for a maximum of 5000 shares per person, and only for those shares in possession continually from July 1 to October 3 (but not necessarily after that).
• The fund will hold the total value of the BNP Paribas shares and received dividends minus the initial investment (€9.4 billion, with an accumulated 6.1% interest per year) and minus any losses suffered on the 24% part of the portfolio of structured products held by the Belgian government.

On December 2, it became known that the Raad van State has advised that this plan likely is unconstitutional, as it does not treat all shareholders equally, and does not adequately formulate the reasons for the inequality⁴².

On December 10, De Tijd reported that the Belgian government was considering not starting the special fund, but putting everything that was to go into the fund directly into Fortis Holding, instead. This would benefit not those who held shares, to a maximumum of 5000, on October 3, but those actually holding shares, any number of shares (earlier that day, share price had gone up 13.5%, to close at €0.82)⁴³. Next day share price closed up 15% at €0.94 after hitting €1.14 intraday.

Legal proceedings

A multitude of legal proceedings was threatened, and some were indeed effected:

• In a case brought, among others, by the VEB, the Dutch association of shareholders, before the Ondernemingskamer, in Amsterdam, Fortis defended itself, October 31, by putting the full blame on the Dutch government and the DNB. These had first brought extreme pressure to bear and then had made a deal directly with the Belgian Government. All that remained for Fortis was to sign, perforce, on the dotted line. Thus, they were innocent of the disaster⁴⁴. The court's ruling was made known on November 24; in anticipation trade in the share was suspended for the second part of the afternoon (from 15.45h onwards, at a share price of €0.59). In its ruling the Dutch court instituted a legal investigation into the affair (by a Committee of three), costs to be borne by Fortis, but not to exceed €600,000. The court declined to obligate Fortis to get shareholder approval, noting in wonderment that this had only been requested by Euroshareholders, the European Association of Shareholders but not by the VEB, the Dutch Association of Shareholders⁴⁵.

• In a case brought by Modrikamen on behalf of Belgian shareholders before the Belgian Commercial Court (Rechtbank van Koophandel / Tribunal de commerce), in Brussel, the Openbaar Ministerie, November 6, stated that the sale to BNP Paribas was illegitimate, unless it was approved by the meeting of shareholders⁴⁶. The ruling was made known on November 18; in anticipation trade in the share was suspended for the afternoon (from 13.45h onwards, at a share price of €0.71)⁴⁷. The judge ruled that Fortis' Articles of Association did not require shareholder approval and that the sale was legitimate under Belgian law; the Board of Directors had indeed acted under duress. However, information to the shareholders had been inadequate. Also, the court appointed a Committee, of three, to look at the financial side of things⁴⁸. On December 16, De Tijd, noting what De Morgen reported as happening at the Appeal (see below), reported a strong rumour that in this first case the government had exerted repeated, direct pressure on one of the magistrates⁴⁹.
• Rumors of a legal suit to be brought against erstwhile chairman Lippens by Russian bilionair Kerimov were denied by the latter, November 20⁵⁰.
• It is reported that the Chinese government, brought into it by Ping An, has threatened to invoke a treaty, which stipulates that a government (party to the treaty) may only nationalize a company if this is done legally and if damages are paid (going by the value just prior to nationalization). The Belgian government should pay out €1.8 billion to Ping An to prevent this. Also the Chinese government is reported to consider a complete ban on Chinese investments in Belgium⁵¹. The Belgian prime minister Leterme rejected this claim, as the treaty had not yet been ratified by the Wallonian subgovernment. The investment of Ping An in Fortis had been ill-advised and Ping An should bear the consequences of its own actions⁵².

December 1 and 2 meetings of shareholders

Fortis announced to hold shareholder meetings on December 1 and 2, in The Netherlands and Belgium, with the convocation appearing on November 14. On the agenda was a justification of the sale, but not the opportunity for the shareholders to approve or disapprove this⁵³⁵⁴. What was on the agenda is the new composition of the Executive Board (with a new chairman, at a salary of €800,000) and the Supervisory Board and the question whether Fortis can be continued. Under Belgian law, approval by more than 50% of the capital (or a simple majority, in a second meeting) is required for a company suffering this bad a loss to be allowed to continue to exist.

However, Ping An (a major shareholder in Fortis Group, holding 4,8%) has demanded that approval of the sale is put on the agenda, and has announced to be willing to go to court over the matter. By its own Articles of Association, Fortis is required to accept such a request from a shareholder who holds a minimum of 1% of the outstanding shares, but this applies to the (annual) Ordinary General Meeting (Article 18b.4ii; the request must be made in writing, 60 days in advance), not necessarily to an Extraordinary General Meeting⁵⁵⁵⁶.

In its Shareholder Circular (November 20) Fortis acknowledges that under Dutch law approval by shareholders is required, but refers to a blanket provision in Dutch law (BW2:8), which states that no agreement or law applies if this would have results that, by standards of reasonability, are unacceptable.

The VEB and Deminor proposed new candidates, instead of those proposed by Fortis, but Fortis declined to take this into consideration. In the end, the meetings at Utrecht and Brussels went ahead with the agenda unaltered in all respects. At the meetings, the board took the position that they too were heartbroken, but that they could not help any of it and that if the EU and government measures in support of banks had been put in effect a few days earlier there would still be a Fortis. The two appeals actually made by Fortis to the government of Belgium had been rejected. The shareholders, heartbroken by their losses, and betrayed by a long string of false reassurances (by Fortis, the Belgian regulators and the Belgian government) were unimpressed. At the meeting in Utrecht, attended by well over a thousand shareholders representing slightly over 20% of the capital, the proposal to appoint Davignon as chairman of the Supervisory Board just scraped by (50,6%). At the meeting in Brussels, attended by over five thousand shareholders representing some 23% of the capital, he just failed to get support (49,9%). As two of the other candidates also failed to be elected, the old board remains in place. Both meetings were unruly (all participants having to pass a metal detector), with the meeting in Belgium much more grim, but only one shareholder was actually forcibly expelled. However, the meetings did approve the new chairman for the Executive Board⁵⁷⁵⁸⁵⁹. As less than 50% of the capital was represented in Brussels the question of continuing the company was not discussed, but deferred to December 19.

In addition to the December 19 meeting (in Belgium only), new meetings in January are anticipated, to address the question of the composition of the Supervisory Board⁶⁰.

The Appeal and its consequences

After the ruling in Belgium, Modrikamen instituted an appeal, at the Court of Appeal (Hof van beroep / Cour d'appel). At the hearing, the Openbaar Ministerie, surprisingly, reversed its earlier position that the sale had been illegitimate.

On Friday December 12 it was circulated that the ruling in the appeal, set for Monday December 15, had been deferred for up to two weeks⁶¹. However, later that day, word was that the Court of Appeal would be taking further action that same day, although reports on what this action would be were conflicting. It was reported to concern either a request by FPIM (the foundation acting for the Belgian government) to reopen the deliberations, by adding the EU-decision that no EU-rule on competition had been broken, or the verdict of the Court. Trade in the share was suspended from 16.30h onwards (at a share price of €0.93 in the Netherlands and €0.92 in Belgium). It later proved that on Thursday there had indeed been such a request by the FPIM, which was debated on Friday afternoon and the handling of which would indeed require up to two weeks, but the Court denied the request in its ruling, which it passed early that same evening⁶².

In its ruling the Court of Appeal reversed the earlier ruling, and ordered that the actions of October 3, 5 and 6 did require shareholder approval, at a meeting of shareholders to take place no later than February 12: only those who held shares on October 14 will be allowed to vote. The agenda of the meeting of December 19 should be amended to include, as a matter of priority, if it was still necessary to deliberate on the question of whether to dissolve or continue Fortis. The FPIM is ordered to keep the shares of Fortis Bank that it obtained in October (representing a majority stake) until February 16. Also, a new Committee, of five, was appointed to investigate matters⁶³⁶⁴⁶⁵.

• In immediate response, both the Belgian government and BNP Paribas announced they would be taking further action⁶⁶⁶⁷.
• On the other hand, Peter Paul de Vries, representing Euroshareholders, stated on Dutch television that he thought this opened the way for damage claims by shareholders, suing the Dutch and especially the Belgian government⁶⁸.
• In response to the ruling, core members of the Belgian government met at noon the following day to confer. It was reported they considered having the ruling annulled on technical grounds (the ruling had not been read aloud, and one of the three judges had been home sick, and had not personally signed the document). Another option considered was to go ahead with the resale of the 49,93% minority stake obtained in September (in exchange for financial support that stayed within Fortis Bank) instead of the 75% majority stake. It was announced that a decision would be made on Monday evening⁶⁹. A further approach potentially open to the government was to take the position that as a 'third party', not heard by the Court, the ruling did not apply to them (other sources countered this by pointing out that the FPIM-foundation had represented the government). It was reported that, upon closer reflection the government decided not to try and annull the ruling on technical grounds, but to have become more determined to sell their 49,9% stake in Fortis Bank to BNP Paribas, quickly (preferably by Tuesday, but anyway within a week)⁷⁰.
• The Dutch Ministery of Finance stated that the sale to the Dutch had been transacted under Dutch law, that the agreed on price had been paid and that the shares had been transferred: the sale was final, and was unaffected by the ruling⁷¹.
• In an analysis, De Standaard notes that the ruling primarily creates the opportunity to renegotiate. The shareholders will have the opportunity to disapprove the sales, but in itself this will not necessarily reverse the sales in question. Such sales as have been finalized will thereby become illegitimate, but only a further court decision will determine if this is to result in a reversal, damages paid, or will remain without consequences. Such further court cases are best avoided, and renegotiations preferred⁷².
• In a press conference Sunday afternoon, Modrikamen, the lawyer winning the case, appealed for calm. Now that the Court had ruled and all emergencies were over, all parties should sit down together and renegotiate to come up with a solution acceptable to all parties. He also stated that the sale to the Dutch was not necessarily a done deal: the Court had not excluded this sale from its ruling that all the transactions of October 3, 5 and 6 were subject to shareholder approval⁷³. According to de Volkskrant, Modrikamen is aiming to get an additional €6 billion from the Dutch government⁷⁴.
• Sunday, late afternoon, the CBFA announced that, upon request from Fortis, it had decided to keep trade in the share suspended until further notice⁷⁵.
• Sunday also, Fortis Bank came forward to reassure its customers, with CEO Dierckx stating that Fortis Bank was now the safest bank in the world, not only being a bank with propably the highest degree of solvability in all of Europe, but also being the 99% property of the Belgian government and being partnered with BNP Paribas, a very secure bank. All was well with the world⁷⁶. A day later it proved there had been no detectable unusual withdrawals of funds from Fortis Bank⁷⁷.
• The Belgian government is reported to be in all-out panic and to be utterly determined to sell Fortis Bank as quickly as possible to BNP Paribas anyway. The prime line of offence is to have the ruling annulled. The minister of Justice is reported to be preparing to intervene on the ground that the ruling states that it was read aloud, which it wasn't. Also the government is reported to proceed on the basis that the 'third party'-rule was violated⁷⁸. In the view of the government, if the ruling holds, its negotiation position will go to pieces, with BNP Paribas having the upper hand. The government has to sell with no other takers available. Thus, the ruling is not a victory for the shareholders but for BNP Paribas⁷⁹⁸⁰.
• Meetings of shareholders had been planned on Friday December 19 for both Fortis and BNP Paribas. The meeting of BNP Paribas was organized to approve issuing extra shares with which to pay for Fortis Bank, a sale which now, by court-ruling, requires approval by the shareholders of Fortis and thus has suddenly become uncertain. The meeting of Fortis (in Belgium only) was organized to decide whether or not to continue Fortis Group. The board of Fortis was ordered by the Court to alter the agenda, which it had declined to do for the December 1 & 2 meetings, claiming this was impossible⁸¹. The lawyers of Fortis were reported to be weighing the court-ruling versus laid-down procedure and law⁸².
• Early on Monday, December 15, Fortis announced in a press release to conform to the court-ruling and to amend the agenda of the meeting of December 19. Also, it noted that Fortis, for the time being, would remain the owner of Fortis Insurance Belgium, but would not become the owner of 66% of the portfolio of structured credit⁸³.
• On the news that it was now uncertain that Fortis Bank could be acquired the share price of BNP Paribas dropped 10% on Monday December 15⁸⁴.
• In the evening of Monday, December 15, the Belgian cabinet met with Baudouin Prot, representing BNP Paribas, and afterwards announced to go ahead with the sale to BNP Paribas. The FPIM would seek an annulment; the government itself would start a 'third party' procedure; and pending clearance for the sale of a 75% interest in Fortis Bank the government would proceed with the sale of its 49,93% stake⁸⁵.
• On December 16 De Morgen reported on the absence of the sick judge. She had earlier been reported to be a member of the same party as Prime Minister Leterme, with her husband an acquaintance of the P.M. (the P.M has commented on the matter, denying any contact over the past few years with the husband of the judge⁸⁶). Her absence at giving out the ruling itself was no legal objection, but if the request of the FPIM had been honored, and deliberations had been reopened, it would have been a requirement that she was present, or that the case had been tried anew by a different set of judges, in which case any ruling would take place well after the deal with BNP Paribas was finalized. The other two judges were reported to have attempted to visit her at home, but not to have been admitted. The judge is reported to have filed a formal complaint againt her two colleagues⁸⁷. The formal complaint, of being pressured to try and make her sign the ruling, of being harassed by phone and by an attempt to visit her at home, was quickly dismissed⁸⁸⁸⁹.
• On December 16, Modrikamen, the lawyer winning the case, changed the address-to-which-correspondence-is-to-be-addressed of his clients. Up till then, his office was the correspondence address. The change means that all further correspondence has to be mailed to each client individually (he represents over two thousand clients). Also, as some of the clients live abroad, a different set of terms now applies, as to the time in which cases have to be handled. Also, the correspondence has to be translated into the adressee's language⁹⁰. As a consequence, it becomes less likely that any 'third party' action to be instituted by the government will be handled this year. Also, it is reported that the FPIM had indeed appealed for a substitution of judges, but as it had done so only after the ruling, this was dismissed⁹¹.
• On Wednesday December 17, before the market opened, Fortis issued a press release on its new financial position. Compared to the earlier statement, of November 14, the pro forma net equity has decreased from €7.7 billion to €6.7 billion; the third quarter results have increased from a pro forma net loss of €135 to a pro forma profit of €152 million⁹². Trade in the share was resumed that day, but after moving up sharply at the opening (hitting €1.10) share price subsided, to close at €0.96. However, that same day the shares of BNP Paribas hit a new low (down over 17%, presumably because of exposure to the Madoff affair); share price at closing was almost exactly half of what it was at the moment the swap of shares between the Belgian government and BNP Paribas was agreed, at a fixed price.
• On December 17, Belgian Prime Minister Leterme circulated a letter he wrote on the topic of his contacts with the judiciaries dealing with the case. At the initial stage, at the Commercial Court, his staff had indeed made contacts, but only very briefly and only after a decision had been reached. At the Appeal there had indeed been direct contact between his staff and the husband of the 'sick judge', but the P.M. had been unaware of this and, upon learning of it, had taken measures against those of his staff involved⁹³. The prosecutor at the initial stage, at the Commerial Court, came forward and refuted this statement: contact had been early (just before the prosecutor would state publicly that he considered the sale to be illegitimate) and incisive (but brief, the prosecutor having broken off the phone call quickly); he stated to be prepared to testify to that effect before parliament⁹⁴. Parliament took the matter very seriously, the principle of the separation of powers being at risk, and instituted an investigation, entrusting the task to an existing Committee⁹⁵. This investigation was supported by almost all of Parliament, which was not the case for the demand that the P.M. step down, supported only by the opposition. At the end of the debate the P.M. emphasized that he took the separation of powers very seriously, had been unaware of the actions of his staff and had acted to provide clarity as soon as rumours stared circulating⁹⁶. The first chairman of the Court of Cassation (Hof van Cassatie / Cour de cassation) gave a press conference at which he stated that he regretted that the impression had arisen of government intervention, but that there was no evidence to support that the government had actually had influenced the course of events. However, a formal investigation had been started to establish if the 'sick judge' had behaved improperly⁹⁷. Vice-prime minister Reynders appealed for political calm: all the uproar was making it increasingly difficult for the government to sell Fortis to BNP Paribas⁹⁸.
• December 17, ABN AMRO let it be known that it would seek to reverse the (non-finalized) EU-forced sale by Fortis of the ABN-AMRO business activities to Deutsche Bank, the sale at which Fortis had taken a €300 million loss (see above)⁹⁹. In response, next day the EU put on hold the integration of ABN-AMRO and Fortis Bank Nederland, until there was clarity on what would and would not belong to the company¹⁰⁰.
• December 17, a group of Dutch shareholders, united in FortisEffect, stated that as a consequence of the ruling at the Appeal it would now move against the Dutch state, a €11 billion claim being mentioned¹⁰¹.
• Thursday December 18, BNP Paribas cancelled its Friday December 19 meeting of shareholders, which was supposed to approve the take-over of Fortis, and the issuing of extra shares to pay for it¹⁰². A little later, BNP Paribas announced that this did not mean that the take-over was cancelled, but only that the time schedule had been upset¹⁰³.
• December 18, the Belgian newspapers were in an uproar on the theme of a violation of the principle of the separation of powers, with an advanced position taken up by Yves Desmet, who draws the conclusion that the government was aware of the gist of the ruling two days beforehand and had instituted a diversionary manoevre (a frivolous request by FPIM on Thursday) to derail the ruling¹⁰⁴. Early afternoon, the abovementioned first chairman of the Court of Cassation followed up with a letter to parliament, with a statement on the pressure exerted by the Belgian government on the Court of Appeal¹⁰⁵. Parliament was in an uproar, and a statement by the Prime Minister was announced for 17.30h; national television went into the air with a live broadcast, speculating whether only the P.M. would step back or the entire government, but no statement was actually made. The cabinet remained in a meeting until 23.30h, after which the P.M. snuck out of the building through a backdoor¹⁰⁶. The Minister of Justice counterattacked with a letter in which he stated that contacts between the government and the judiciary were nothing out of the ordinary, as otherwise the government could not govern. In his capacity as the Minister of Justice he had indeed been called upon in the early afternoon of Friday 15, because of irregularities, and he had instructed the procureur-generaal at the Court of Appeal (acting as Openbaar Ministerie) to look into these. The procureur-generaal had made a request to the presiding judge to move the case to a newly composed chamber, but the request was declined, and the ruling was passed anyway¹⁰⁷¹⁰⁸. Later that evening, a letter was circulated in which the procureur-generaal at the Court of Appeal formulated his position on the irregularities on Friday December 15. The FPIM had made a request on Thursday, and the court had only held an informal hearing before rejecting this; instead it should have held a formal hearing and deferred the ruling until this was settled; therefore the ruling was illegitimate. The cabinet was reported to set great store by this letter¹⁰⁹. In the letter it becomes clear that the 'sick judge' had started the ball rolling, after reporting sick, by an e-mail to the procureur-generaal, claiming an irregularity¹¹⁰.
• December 18, as a result of the uncertainty that the take-over would go through, the share price of Fortis went up almost 20%, closing at €1.15. This is above the magic €1, below which a share is considered to be a pennystock¹¹¹.
• December 18, various representatives of shareholders, until then litigating separately, united to write a letter to the Belgian Minister of Finance. They made an appeal to all parties to sit down together and work out a solution, before year's end, which would allow Fortis to continue as a Belgian company, and to assure as many as possible of its employees of job continuity¹¹².
• Friday December 19, early in the morning, De Standaard draws the conclusion that the Court of Cassation is convinced that the government was aware of the gist of the ruling two days beforehand and had instituted a diversionary manoevre (the request by FPIM on Thursday) to derail the ruling: it foresees a hefty debate in parliament. Much will depend on the requested, more detailed report by the Court of Cassation¹¹³. The abovementioned commentator Yves Desmet went further and stated that the government was so poorly coordinated that it was unable to properly organize even its own downfall¹¹⁴.
• December 19, 16.15h, the abovementioned chairman of the Court of Cassation came into parliament with a six-page letter. His conclusion was that there was no hard legal evidence of interference by the government, but that there were strong indications of it, nevertheless. He pointed out several persons as out of bounds, including the Minister of Justice and the procureur-generaal at the Court of Appeal, who together had taken some highly questionable actions on the afternoon of Friday December 12. As a consequence of this report, the Minister of Justice stepped down immediately¹¹⁵. On the proposal of the Prime Minister the rest of the cabinet followed, after consulting for a hour or so. The resignation of the Leterme government, fallen over its handling of the Fortis-affair, was accepted by the King on Monday December 22^116117118. Leterme himself emphasized repeatedly that he was innocent of any interference with the law courts, and was convinced that the inquiry by parliament would clear his name, but that it was not realistic for the cabinet to continue and that he was not available for a new cabinet¹¹⁹¹²⁰.
• December 19, the government won a court decision to obligate Modrikamen to continue to use his office as the one correspondence address for all his clients, thus forbidding his December 16 ploy (see above)¹²¹.
• Saturday December 20, De Standaard published an interview with the husband of the sick judge, 'The Man Who Brought Down The Government', in which he states that neither he nor his wife committed any breach of confidence. His wife was being consistently overworked by the Court, and Wednesday, after being abused by the presiding judge, who had yelled at her threateningly, she had come home sick, early, on the brink of a nervous breakdown. A physician who was consulted prescribed rest and forebade her to leave the house. The husband had personally gotten an e-mail from the first chairman of the Court of Appeal with details of the case, being pressured to get his wife to respond. On Friday the couple was visited by the police, sent by the Court, which was followed up by a visit from the presiding judge, who made further threats. He, the husband, had merely called the staff of the prime minister to protest the abuse, not to pass on information, and had merely mentioned that there was an (unspecified) dramatic turn in the case as background information¹²².
• Tuesday December 23, an exploratory investigation into the dealings of the judiciary in this case is announced by the High Council of Justice (Conseil supérieur de la Justice / Hoge Raad voor de Justitie)¹²³.

The December 19 meeting of shareholders

A further meeting of shareholders took place on December 19 (in Belgium only). Originally this was to decide on the question whether or not to continue Fortis, in case there was not an adequate majority on the meeting of December 2, but Fortis had announced in a press release to conform to the court-ruling and to amend the agenda of the meeting, and to decide first if the meeting wanted to decide on the matter at this time¹²⁴. The relevant item on the agenda was not presided over by the acting chairman of Fortis, but by the co-chairmen of the court-appointed Committee¹²⁵.

At the meeting, although Fortis proved to be in favor of deferring the decision, the shareholders declined to do so. A vote was taken; Fortis was to be continued¹²⁶¹²⁷. The meeting was again unruly, with recriminations commonplace. The Fortis board argued that they had not had much choice, and that if nothing had been done the Kingdom of Belgium might well have gone bankrupt (like Iceland and Hungary). They also issued a warning that a renegotiation would not necessarily result in more shareholders' value, not with the general decline of the financial markets¹²⁸

Post-Leterme I developments

After the December 19 meeting and the fall of the Leterme I government developments continued:

• Saturday December 20, De Standaard reported that although the court had forbidden Modrikamen's correspondence-address ploy, there would be no follow-up with a 'third party' action, not while the government was in crisis¹²⁹.
• Monday December 22, BNP Paribas CEO Prot stated in an interview in Les Echos that the shareholders of Fortis should not be hoping for a better bid than the one they already got, as Fortis Bank had not increased in value since October 10. Other sources point out that BNP Paribas is doing badly; share price that day passing the limit of €30, downwards, as the market assumes that if PNB Paribas cannot fortify its capital position by taking over Fortis Bank it needs to attract capital from another source¹³⁰.
• Wednesday December 24, Fortis put out a press release announcing a €300 million loss. It had bought American and British currency, for a transaction concerning the portfolio of structured credit, in anticipation of a negative court-ruling. When the court did decide to act, the portfolio no longer was a concern of Fortis, which then resold the currency on December 12, at a loss. As a result, the cash position declined accordingly, and the pro forma net equity has declined from the reported €6.7 billion to €6.4 billion¹³¹. Share price suffered, breaking through the magic €1 level downwards, again becoming a pennystock, closing that day at €0.95.

See also

• List of Belgian companies
• List of Dutch companies
• ABN Amro
• European Financial Services Roundtable

References