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Coup de grace

9 February 2021 By Christopher Thompson

Laurent Mignon is taking a cheap bet on some discounted traders. The chairman and chief executive of retail cooperative BPCE has made a 3.7 billion euro offer for the 29% of Paris-listed Natixis it doesn’t already own. A plan to double-down on the misfiring investment bank looks bold, but could still pay off.

Mignon‘s timing seems a little odd. After suffering heavy losses in the first half of 2020, the investment bank cum asset manager reported a strong rebound in profitability in the last quarter. CEO Nicolas Namias is also making good on a pledge to exit a troubled partnership with London-based boutique H20 Asset Management. When BPCE put out a statement in mid-July that it did not intend to make an offer, Natixis’ shares were trading at around 2.53 euros. The wait will cost it nearly 1.4 billion euros.

That doesn’t mean Mignon is paying a steep price. The 4 euros per share offer values Natixis at just below tangible book, a discount to where it traded a year ago prior to Covid-19. It may also be an implicit criticism of public markets’ disdain for banks with large trading desks.

Mignon’s offer values all of Natixis at 12.6 billion euros. But the asset management unit alone could be worth as much as 8.7 billion euros, if, as Barclays expects, it can make pre-tax profit of 1 billion euros this year, pay tax of 30%, and is valued on a 13 times price-earnings multiple. Then there’s the insurance business, which could fetch 4.4 billion euros, using Barclays estimates and a 14 times sector multiple. The combined value of 13.1 billion euros suggests Mignon would be getting the investment bank plus the smaller payments business for less than nothing.

BPCE hasn’t said what it plans to do once it has full control. One idea under discussion, according to Reuters, is to sell all or part of the asset management unit, creating greater scale and synergies. Potential buyers include French rival Amundi or Germany’s DWS.

True, that would leave BPCE even more exposed to the investment bank, which has been a source of surprise losses over the years. But the unit’s revenue rose sharply quarter-on-quarter in the last three months of 2020 and analysts expect it to be profitable this year. If investors see little value in traders, Mignon may profit handsomely by taking the other side.


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