Arab shareholders in the French financial and industrial conglomerate, Compagnie de Suez, are backing efforts by chairman Gerard Worms to prevent the group’s merger with Banque Nationale de Paris (BNP) and Union des Assurances de Paris (UAP), Paris bankers say.
The future of Suez, which has its origins in Middle East finance and owns Banque Indosuez, has been hotly debated since Worms disclosed in February that the group had run up losses of FF 4,700 million ($960 million) in 1994, mainly as a result of problems with property investments.
The principal Arab shareholders in Suez are Lebanese Prime Minister Rafiq Hariri and the Kuwait Investment Authority. Arab interest in Suez is also informed by the fact that Banque Indosuez owns stakes in several Middle East institutions, and is one of the most active international banks in the region (see table).
Worms was subjected to a barrage of criticism from French institutional shareholders at a 14 June general assembly. BNP and UAP, which own 11.9 per cent of Suez in total, are proposing to set up a new merged entity. This has been rejected by Worms, who has accused the two institutions of being motivated by a desire to use the Suez shareholders’ funds for their own purposes. Worms has been trying to strengthen his position by forging alliances with other French institutions, most recently Lyonnaise des Eaux.
The main issue for the Arab shareholders is to ensure the integrity of Banque Indosuez, Paris bankers say. The Arab parties are said to be particularly concerned at the possibility that BNP would effectively take over Indosuez. This would be likely to result in a re-appraisal of the bank’s involvement in the Middle East, and would bring in a completely new management style, distinct from the present personalised approach, bankers say. However, the Arab shareholders are said to be reluctant to consider injecting fresh funds into Indosuez because of the unattractiveness of French franc investments.