The blocking of the Hinduja Group’s planned $1.9 billion-acquisition of Luxembourg-based bancassurer KBL European Private Bankers (KBL epb) — the private banking arm of KBC — by the country’s financial sector watchdog has triggered speculation whether European regulators closed ranks to block the deal for reasons other than pure commercial merit.
Luxembourg’s financial services regulator Commission de Surveillance du Secteur Financier (CSSF) stopped its evaluation of the deal, announced in May 2010, a fortnight ago.
The Hinduja Group said it would not comment for this report, but analysts said the deal’s failure would send wrong signals for Indian companies planning European forays.
“This move will be a major setback for Indian companies planning overseas acquisitions,” said a top executive of a global merchant banker requesting anonymity as some of his clients were in engaged in merger and acquisition (M&A) negotiations in Europe and the US.
European media reports suggested that the CSSF may have been influenced by advice from other European countries.
“People close to the matter said the Commission de Surveillance du Secteur Financier had received advice from European regulators, including the UK’s Financial Services Authority, advising against the transaction. The FSA declined to comment,” the Financial Times of London quoted in an online report posted on its website on March 15.
French language newspaper Agefi termed the blocking “unexpected” and “intriguing.”
“Unexpected. But most intriguing. Two days after KBC has announced the sale of its private banking activities will not occur, many questions remain unrealised,” L’Agefi said in a report on March 17 posted on its website. “The real motives of this regulatory decision remain unclear,” it said.
The acquisition, originally due for completion in the third quarter of 2010, was billed as one of the biggest financial services acquisitions in Europe by an Indian business group.
Analysts were surprised that CSSF had not publicly announced its decision and it was KBC that first released the news to the media.
“The lack of transparency in making the announcement is a worrying development, for it could mean the deal may have been blocked for reasons other than pure commercial merit,” the merchant banker quoted earlier told HT.
When contacted for this story, KBL epb said it had nothing more to say beyond its statement of March 15. “Of course we are disappointed that it had to end this way,” Jacques Peters, CEO of KBL epb had said in the press statement at that time.