Pebereau’s proposed menage a trois is audacious–and fraught with complications. For one thing, only a month ago SocGen and Paribas had announced that they would be merging to form one of Europe’s largest banks. For another, the brash move pleased the French establishment not a bit. Unlike the SocGen-Paribas union, which was friendly and blessed by the government, Pebereau didn’t discuss his blockbuster attack with any government officials, or with executives at SocGen or Paribas. He might as well have tossed a rock through a window of the Finance Ministry. Pebereau says his initiative is the “best possible” way to consolidate the French banking system. It also may have been the only possible way for Pebereau to guarantee himself a prominent role in that consolidation, once his two preferred merger partners had paired off with each other. After closed board meetings, both SocGen and Paribas rejected the BNP offer. And government mandarins, caught off guard, have reacted coldly.
But behind their studied indignation, French bureaucrats know a sea change when they see one. Win or lose, Pebereau has blown away the polite facade of French–make that Euroland’s–business culture. The era of cozy dealmaking, already on the wane, is now clearly over. Takeovers beget takeovers. The great European restructuring is underway–and if your rival is a buccaneer, can you afford not to be? With the euro now a dependable vehicle for raising large sums of capital, ambitious (or frightened) CEOs no longer need to rely on the good graces of politicians to get ahead. Increasingly, fast-moving investment bankers and international investment funds are calling the shots. The old guard has not totally lost influence. But a bumptious financial crowd has stormed into Europe’s drawing rooms, and they’re starting to flip over the furniture. As one analyst close to BNP said last week: “This signifies the end of ‘Papa’s capitalism’.”
Nowhere is this more apparent than in Italy, which like France has long been a bastion of statism. There, a rancorous and very public battle between Telecom Italia and Olivetti–the biggest takeover fight ever in Europe–is riveting the nation. Olivetti, a failed PC company that’s become a modest success in telecommunications, has made a XXX 53 billion offer for Telecom Italia, the world’s sixth largest phone company. The feud pits Franco Bernabe, the 50-year-old reformer recently recruited to run Telecom Italia, versus Roberto Colaninno, 56, an erstwhile auto-parts executive who has rescued Olivetti after years of heavy losses.
With the guts of a cat burglar and the magic of creative capitalism, Colaninno is trying to snatch a former state-owned monopoly that’s five times bigger than Olivetti. As with the BNP offer in France, analysts don’t expect him to win. But his gambit promises to alter the face of Italian finance. Before the arrival of European Monetary Union, an upstart like Olivetti couldn’t have begun to finance a gargantuan deal of this sort. And meddlesome, Machiavellian politicians wouldn’t have let it happen. The Italian government still owns 3.5 percent of Telecom Italia, but it’s mostly watching from the sidelines as this Fellini-like drama unfolds. Will Rome’s new takeover and corporate-governance laws promote transparency and fair play? Some U.S. and British stock funds remain skeptical, but the locals are impressed. “The [old government-family] axis is broken for good,” says Giovanni Tamburi, an M&A consultant in Milan.
To win Telecom Italia, Olivetti is cobbling together the first euro-denominated takeover package. The firm aims to borrow at least XXX 20 billion in syndicated loans, sell euro-bonds worth an additional XXX 12 billion–and then sell its crown jewel, Omnitel, the second biggest wireless operator in Italy, to Mannesmann AG of Germany for an additional XXX 7 billion. The deal is so bold and complex that one half expects to see Michael Milken, America’s Roaring ’80s junk-bond impresario, puttering around the Coliseum on a scooter.
Bernabe, who revitalized the oil group ENI before joining Telecom Italia, seems delighted with the sudden opportunity to restructure Telecom Italia–even if under duress. He’s promised top managers to undertake a “Copernican revolution” at the company, and he offered to send Colaninno a gift for forcing the pace of change–if Olivetti loses.
France’s banking business isn’t quite so unbridled, but serious changes are afoot. “France has been lagging behind other countries,” says Laurent Treca, BNP’s director of strategy and development. “For years French banks weren’t governed by the market, but by the state… So this is a big, big change.” That does not mean that France is prepared to accept what it calls “savage capitalism.” It is not. Pebereau insists there will be no forced layoffs if his double-barreled offer is accepted. Unions don’t believe him. Were BNP and SocGen to combine, they’d have 4,700 retail branches in France, many of them on the same street corner. “We’re not fooled by wordplay,” says Jean-Claude Piacentile of Force Ouvrier, the largest banking union. “This is an operation of destruction for the employees.”
Even if Paris comes round to the notion of a megabank, Herve Goulletquer, the chief economist of Credit Lyonnais, points out that bigger does not necessarily mean better. “Just putting three banks together doesn’t give you a [profitable] global bank,” he says. “At their base, their clientele will still be very French, very European. To be global, you have to have activities in a lot of different areas. I’m not sure that SBP will.” True. But if you’re ever going to compete globally, the first thing you have to do is make sure you survive the shakeout in your home market. And for CEOs all over that new, eat-or-be-eaten place called Euroland, that’s an increasingly urgent priority.
