Benelux governments rescue Fortis to avert U.S. contagion

By Antonia Van De Velde and Marcin Grajewski

BRUSSELS (Reuters) - Benelux financial group Fortis underwent a shotgun nationalization on Sunday after emergency talks with European Central Bank President Jean-Claude Trichet to prevent U.S.-style financial contagion engulfing one of Europe's top 20 banks.

The Belgian, Dutch and Luxembourg governments agreed to inject 11.2 billion euros ($16.4 billion) into the banking and insurance company, which will sell the parts of Dutch bank ABN AMRO that it bought last year, precipitating its troubles.

Belgian Prime Minister Yves Leterme announced the bailout at a news conference after a weekend of high drama in the first major bank crisis to hit the euro zone in 13 months of global financial turmoil that began in the United States.

Sources close to the talks said the Benelux governments chose a partial state buyout after investor confidence collapsed last week and two private bidders offered paltry terms.

"We could have not intervened, but the question was whether Fortis would have survived on Monday," Dutch Finance Minister Wouter Bos told reporters.

Each government will take a 49 percent stake in Fortis banks in their respective countries. Belgium will put in 4.7 billion euros, the Netherlands 4.0 billion and Luxembourg 2.5 billion, the latter in the form of a convertible loan.

The most likely private bidder, France's BNP Paribas, pulled out after offering just 1.60 euros per share, compared to Friday's closing price of 5.20, and demanding state guarantees against possible future losses, one source said.

Another source close to the talks said BNP Paribas had offered 2 euros a share and the Dutch ING Group just 1.5. "There was no serious bidder for the intrinsic value of the whole group," the source said.