VZCZCXRO0452
PP RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHBS #0204/01 0431729
ZNR UUUUU ZZH
P 121729Z FEB 09
FM AMEMBASSY BRUSSELS
TO RUEHC/SECSTATE WASHDC PRIORITY 8577
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEHBJ/AMEMBASSY BEIJING PRIORITY 1774
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 BRUSSELS 000204 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EEB/OMA, EUR/ERA, EUR/UBI 
TREASURY FOR OASIA/OIC: ATUKORALIA 
USDOC FOR 4212/ITA/MCA/EUR/OECA/WNE/JLEVINE 
 
E.O. 12958: N/A 
TAGS: EFIN ECON BE
SUBJECT: BELGIUM:  SHAREHOLDERS SAY 'NO' TO FORTIS BANK 
SALE; GOVERNMENT HOLDING THE BAG, FOR NOW 
 
REF: A. A) 08 BRUSSELS 1675 
     ¶B. B) 08 BRUSSELS 1599 
 
SUMMARY 
-------- 
 
¶1.  (SBU)  Shareholders of Fortis Holding on February 12 
narrowly rejected the Government of Belgium's (GOB) October 
2008 purchase of Fortis Bank, once Belgium's largest and 
still its largest private employer (20,000), putting at risk 
a proposed sale of 75 percent of Fortis Bank to the French 
bank BNP Paribas.  A majority of shareholders also voted 'No' 
to the October 2008 sale of Fortis Bank's Dutch assets to the 
Dutch government, although that deal, unlike the BNP one, has 
already been consummated.  Prime Minister Herman Van Rompuy 
tried to reassure shareholders, depositors and employees 
during a February 12 press conference, where he stressed that 
the GOB is still the owner of Fortis Bank.  The PM also 
supported Finance Minister Didier Reynders, who came under 
fierce criticism from nearly all parts of the Belgian press 
following the No vote.  Now the Government, which before the 
vote had stressed that there was no 'Plan B' if the 
shareholders did not give a thumbs-up, must try to figure out 
what to do next.  BNP Paribas, for its part, said its offer 
from October stands until February 28, while it is unclear 
what the No vote means for the already-completed sale of 
Fortis' Dutch assets to the Government of the Netherlands. 
End summary. 
 
CONTENTIOUS SHAREHOLDERS BUSHWHACK GOB'S PLANS 
--------------------------------------------- - 
 
¶2.  (U)  Approximately 7,000 shareholders at a February 11 
general assembly of Fortis Holding, the one-time owner of 
Belgium's one-time largest bank, Fortis Bank, rejected by the 
narrowest of margins (0.04 percent) the Government of 
Belgium's (GOB) effective takeover of Fortis Bank in October 
2008, when the GOB acquired nearly 100 percent of Fortis Bank 
and at the same time brokered the planned sale of 75 percent 
of Fortis Bank's non-Dutch assets to French banking giant BNP 
Paribas.  A December ruling by the Belgian Court of Appeals 
granted shareholders of Fortis Holding the right to vote on 
the GOB's decisions to sell Fortis Bank's assets to BNP 
Paribas and the Dutch Government; the GOB and Fortis 
management had hoped that shareholders would ultimately 
approve their actions so that the BNP Paribas transaction 
could go through.  Defiant shareholders also nixed the 
October sale of Fortis's Dutch assets to the Government of 
the Netherlands; that deal has already been completed, 
however, so it is unclear what the No vote will mean for that 
transaction, for although some commentators following the 
vote said the GOB must now renegotiate with the Dutch 
governemnt, the Belgian press also has reported that the 
Dutch Government has already said it will not renegotiate 
that deal. 
 
¶3.  (SBU)  The 'No' vote rejecting the Fortis Bank sale to 
the GOB obviated a scheduled third vote by shareholders on 
whether to approve the sale to Paribas; that deal is now 
imperiled.  According to a statement on Paribas' website, 
only the bank's October 2008 offer remains on the table until 
February 28, thus implicitly putting to nought a renegotiated 
offer reached with the new Van Rompuy government in January 
2009 that many Belgian analysts said had improved the deal 
for Belgium.  Prime Minister Van Rompuy stated at a February 
12 news conference that the GOB will resume discussions with 
the French bank.  Leading up to the February 11 vote, Belgian 
ministers had reminded shareholders that the GOB had no Plan 
B, in hopes of getting them to vote yes.  But a key 
shareholder, Chinese company Ping An, with 5 percent of the 
shares, had announced over the weekend that it would vote No, 
and many observers believe that its No vote was critical in 
yesterday's outcome.  Key Belgian cabinet members met with 
Prime Minister Van Rompuy in the evening of February 11 after 
the 'No' vote was announced to consider next steps, but to 
date the Government has not said what its next steps would 
be, limiting its statements to assurances to depositors and 
employees that Fortis Bank remains in GOB hands, is stable 
and open for business as usual, and that it will now consider 
its options. 
 
¶4.  (U)  The No vote dominated the Belgian press on February 
12, with observers (especially from the Flemish press) 
particularly singling out Finance Minister Didier Reynders in 
 
BRUSSELS 00000204  002 OF 002 
 
 
their criticism of the Government's handling of the Fortis 
'affair' from the beginning.  Reynders, for his part, has 
limited his public remarks to mostly saying that the No vote 
"complicates the task" of sorting out what will become of 
Fortis Bank, that the GOB is in discussions with BNP Paribas, 
and that no one should expect a quick decision in the next 
few days.  Reynders also told the press that the Government 
was not at fault, blaming management at Fortis Holding for 
poor decisions that forced the GOB to step in and take 
control of Fortis Bank last October, and he also implicitly 
criticized foreign shareholders by saying that a strong 
majority of "Belgian" shareholders voted in favor of the 
Fortis deal. 
 
¶5.  (SBU)  While many newspaper stories on February 12 
appeared to treat the No vote as a victory of sorts for the 
shareholders, others pointed out that the No vote in fact 
only complicates matters for the Government, which has few 
options:  letting Fortis attempt to work out its own deal, 
pumping more cash into the bank, or trying to renegotiate the 
terms of the October deal with the Government of the 
Netherlands and BNP Paribas.  The first option does not 
appear probable, since it was the threat of a failure of the 
heavily-indebted Fortis that led the GOB to act so 
precipitously in the first place last October to try to save 
Fortis.  The second option is complicated by the GOB's 
already-heavy debt load but may end up being the only choice 
if the GOB fails to attract other interested buyers.  And the 
third option is hard to envision, since BNP Paribas has 
already said it will go forward with the deal only on its 
original terms, and the Government of the Netherlands has 
already completed its takeover of Fortis' Dutch holdings. 
Even if the GOB could get those two parties to sit down, it 
is not in a strong position to demand a better deal. 
 
COMMENT 
------- 
 
¶6.  (SBU)  While the GOB is telling all who will listen that 
the No vote was not a defeat for the Government, it is hard 
to conclude otherwise.  Now the GOB, already run by a fragile 
coalition, will have to continue to devote much of its 
attention as well as political (and likely financial) 
resources to resolving what to do with Fortis.  And with the 
country's central bank forecasting a fall of Gross Domestic 
Product (GDP) of 1.9 percent in 2009 and an increase of the 
country's debt/GDP ratio to well over 90 percent due to its 
attempts to stem the larger economic crisis, the financial 
resources available for the GOB to act are limited, at best. 
One financial sector observor told the Embassy that the 
shareholders' No vote unfortunately mainly created much 
uncertainty for the Government, which now must try to calm 
potential investors, depositors and the company's 20,000 
employees, and was not a good thing for shareholders.  Not 
surprisingly, shares of Fortis fell by double digits in 
trading on February 12. 
 
BUSH 
.