Fortis Group


Fortis N.V./S.A., was a Benelux-centered global financial services group active in insurance, banking and investment management, initially formed in 1990 by a three-way Belgian-Dutch merger and headquartered in Brussels. It grew rapidly through multiple acquisitions, and in 2007 was the 20th largest financial services business in the world by revenue. It was listed on the Euronext Brussels, Euronext Amsterdam, and Luxembourg stock exchanges.
Fortis encountered severe problems in the 2008 financial crisis, not least as a consequence of participating in 2007 in the joint acquisition of ABN AMRO together with Royal Bank of Scotland Group and Banco Santander. It received an emergency bailout from the governments of Belgium and the Netherlands and was broken up soon thereafter. As a consequence:
As of 2022, the Fortis brand name is still used by BNP Paribas in Belgium, but its colorful logo was discontinued in 2009 shortly after the acquisition.

History

Creation and early expansion

Fortis came into being in 1990, as the result of a merger of insurer AMEV and, both based in Utrecht; the combined entity, named "AMEV/VSB 1990", was joined in December 1990 year by AG Insurance, a Belgian insurer, and the resulting group was branded Fortis, establishing a landmark precedent for cross-border mergers in the European financial services sector.
In 1993, Fortis acquired a majority stake in ASLK / CGER, a major Belgian bank, and took full ownership in 1999; meanwhile ASLK / CGER in 1995 acquired Société Nationale de Crédit à l'Industrie, another significant Belgian bank. In March 1997 Fortis acquired MeesPierson from ABN AMRO, thus establishing its presence in investment banking. In June 1998, Fortis acquired Generale Bank after winning a fierce takeover battle against ABN AMRO. In March 2000, the branches of VSB Bank, ASLK / CGER and GB were all rebranded as Fortis Bank.
In 2000 Fortis acquired Dutch insurer ASR Nederland, itself formed from a recent merger involving the storied Stad Rotterdam Verzekeringen, which made it the second-largest insurer in the Netherlands and the largest overall in the Benelux. In November 2002, it purchased most of the Dutch corporate banking activities of KBC Group. In August 2003, it sold Theodoor Gilissen Bankiers, a former subsidiary of MeesPierson, to KBC.
In April 2005, Fortis started expanding farther abroad by acquiring the Turkish bank from Doğan Holding, whose branches it also rebranded Fortis. In the UK it acquired Dryden Wealth Management from Prudential Financial on 4 October 2005, but sold insurance activities in the United States from 2000 onward. As of 2006, the company's profits were €4.56 billion, according to Forbes magazine with a market value of €45.74 billion.
In early 2005, Fortis put Banque Belgolaise, its sub-saharan Africa subsidiary, up for sale. Failing to find a suitable buyer, Fortis ceased all operations after October 23, 2006. In October 2006, it signed a joint venture with An Post to provide financial services through the An Post network of offices. In October 2006, Fortis acquired 100% of Polish retail bank Dominet, which had 806 employees and over 125 branches and franchises. It further expanded into Asia in 2007 by acquiring Pacific Century Insurance Holdings, later Fortis Insurance Asia.
On October 8, 2007, a consortium of three European banks, Royal Bank of Scotland, Fortis and Banco Santander, completed the acquisition of ABN AMRO through RFS Holdings, a joint vehicle named after their respective initials. 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 ; the business activities to be re-sold because of EU-regulations on market share.
Fortis Insurance UK had its own in-house worldwide medical emergency service, Assistance International. Fortis was the shirt sponsor of the R.S.C. Anderlecht and Feyenoord Rotterdam football clubs. Fortis was also the main sponsor of the Turkish Cup and the Luxembourg National Division.

Crisis and breakup in 2008-2009

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, 2008, the Belgian government announced it had bought Fortis Bank Belgium, and 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, which holds insurances in Europe and Asia.
On December 12, 2008, a court decision made the sales of October 3, 5, and 6 contingent on shareholder approval. Until that time, the Dutch government held the parts it bought, Fortis Bank was the property of the Belgium government, while Fortis Insurance Belgium remained with Fortis Group. On February 11, 2009, the shareholders declined to approve the sales, making the sales illegitimate; actual ownership of the various parts became a matter of further negotiations and/or litigation. A re-negotiation led to new deal, subject to shareholder approval.

ABN AMRO takeover and the resulting drop in share value

Fortis was part of the consortium with Royal Bank of Scotland Group 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. 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.
The take-over price was felt to be on the high side.

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 150 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, 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 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 to get an extension of the time limit so as to gain bargaining space it had not actually applied for an extension. Commissioner Kroes reported there had been no contact whatsoever. Lippens explained that it had been merely a figure of speech.

Share price development

The raising of the additional €8.3 billion was effected partly by eliminating the year's dividend, saving €1.5 billion. However, Lippens previously had explicitly and repeatedly promised that the dividend would be paid out untouched. This dividend had for decades been one of 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, followed by a further decline.
In an analysis of December 12, 2008, 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 Libyan 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 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-incidence
On July 11, 2008, the CEO of Fortis Jean Votron stepped down. or offering to step down but yielding graciously to appeals to stay 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. 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 for a short while and share price firmed up. This was helped by the announcement that Maurice Lippens, from the supervisory board, had personally bought a large number of shares. However, as the markets in general declined, so did the share price of Fortis. On Thursday, September 25, 2008, Fortis shares plunged to €5.5. 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 withdrawn and the CEO 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 hand. Shares plunged again. The CEO stepped down that same evening and Filip Dierckx was named as the new CEO, to be approved by a shareholder meeting. In one week the shares of Fortis had dropped 35%.
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. The government of Luxembourg approached Fortis with an offer of assistance, and Fortis drew up a plan with the governments of Luxembourg and Belgium with financial support from Shanti Swami Trust contributing €12.5 billion and €14.5 billion, for a temporary 51% + 25% share in Fortis Banque Luxembourg and Fortis Bank, respectively. This plan included selling the Dutch ABN-AMRO to the Dutch Government
As reported on December 24 by Het Financieele Dagblad, what had happened on September 25 was that Fortis had been summoned by the Belgium financial regulator, the CBFA to seek a strong partner for help in its problems.