France's biggest bank stepped in on Tuesday to resolve a "war of widows" dividing the controlling families at luxury Paris store chain Galeries Lafayette, backing a 3 billion euro ($3.9 billion) deal to take it private. BNP Paribas, also aiming to prevent a rival from seizing the chain's profitable finance arm, said it would buy out one of the founding families, the Meyers, and join the opposing clan, the Moulins, in bidding for the rest.
Galeries Lafayette, best known for its gilded Boulevard Haussmann store in Paris - a domed mecca for tourists to the French capital - also controls hardware store BHV, consumer credit arm Cofinoga and half of mass retailer Monoprix.
A slow-burning power struggle between the families reached a critical point last December when mutual bank Credit Mutuel unexpectedly took a 15.6 percent stake in the retailer, hoping to win access to its millions of shoppers through partnerships.
Galeries Lafayette's board unanimously called the move "unfriendly" but there were widespread reports of sharp divisions between the two families, headed by widows of former board members, over how to respond to the move.
The matriarchal feud fuelled speculation about a shake-up or possible take-over at the retailer, driving Galeries Lafayette shares up 22 percent this year. The shares were suspended on Tuesday after ending the prior session at a record 230.8 euros.
The breakthrough came when Leone Meyer, widow of former chairman Georges and head of the supervisory board created on her husband's death, decided to sell up, executives said.
"The Meyer family wanted to give up its control, and at that moment an instability was created and we had to find the best solution," co-chief executive Philippe Houze told reporters.
In the proposed plan, BNP Paribas would buy a 29.5 percent stake in Galeries Lafayette from the Meyer family for 235 euros a share and then, with the Moulin family, plans to bid for the rest of the stock for the same price, the companies said.
The offer will run from April 11 to May 13. If successful, Galeries Lafayette said it could to do a squeeze-out offer for remaining stock that would end trading in its shares.
The French bank's joint offer with the Moulin family, headed by 78-year-old Ginette Moulin, is the highest price ever paid for the firm's stock and represents 18.8 times estimated 2005 earnings of Galeries Lafayette, according to Reuters Estimates.
That compares with 14.3 times earnings for domestic rival PPR, which runs the Printemps department store. The 235 euros-a-share price values Galeries Lafayette at 3.15 billion euros, a 1.8 percent premium to the latest share price.
The move allows BNP to protect its position in Cofinoga by edging up its stake to 50 percent, to be held jointly with Galeries Lafayette, and to widen its consumer credit business.
Consumer finance is a fast-growth business that banks in Europe want to expand as individuals take on more debt.
With 80,000 people a day visiting Galeries Lafayette's 19th-century Haussmann store, over four times the number of visitors to the Eiffel Tower, control of the company also grants access to some of France's most valuable commercial property.
"You can understand the strategic rationale, especially after Credit Mutuel's hostile move on Galeries Lafayette at the end of last year," ABN Amro analyst Kinner Lakhani said.
Credit Mutuel had no immediate comment.
BNP Paribas shares fell 0.6 percent to 55.20 euros, fractionally underperforming a flat European bank sector.
But not everyone welcomed the arrival of dark-suited bankers behind Galeries Lafayette's glitzy shopfront displays - famous in France for once containing live models in lingerie.
"The deal is not particularly shareholder-friendly," a London-based bank analyst said. "We don't like banks to own businesses. We just like them to lend to them and stay at arm's length...but financially it's not a big commitment."
BNP and SEMAD, a holding company majority-owned by the Moulin family, said they would launch a consumer credit project in France and Europe, through the joint control of Cofinoga. Before, BNP had been a passive investor in Cofinoga.
BNP, which would hold the stake in Galeries Lafayette as a private equity investment, planned to eventually exit SEMAD's capital over time, the companies said. BNP said private equity investments were normally held for five to 10 years.
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