(Bloomberg) -- The Belgian government's move to sell stock in BNP Paribas SA days before a crucial election in France took the market by surprise and resulted in the banks managing the sale being left with unsold stock worth hundreds of millions of euros, according to people familiar with the matter.
The unusual structure, called a forward-sale transaction, means that the seller won't deliver the shares for a month, instead of the typical settlement period in Europe of up to three business days. The deal was set up so that Belgium will be able to hang on to the stock long enough to receive a dividend of 2.70 euros a share for the last financial year on its entire, pre-sale stake, the government said Wednesday.
Bank of America Corp., BNP Paribas, Citigroup Inc. and Goldman Sachs Group Inc. managed the sale, though it's unclear how much stock each bank was left with, said the people, who asked not to be identified because the details are private. Representatives for the banks declined to comment. The Belgian government didn't immediately respond to a request.
The size of the offering and the discount also contributed to lower demand, the people said. Belgium's Federal Holding and Investment Company, offered about 31.2 million shares, representing roughly 2.5 percent of the French bank's capital and leaving Belgium with a 7.8 percent stake, according to terms seen by Bloomberg. Lazard Ltd. advised the government.
They fetched 65.10 euros apiece, or 1.6 percent less than the stock's closing price on Wednesday, amounting to about 2.03 billion euros ($2.2 billion). BNP shares fell 0.4 percent to 65.91 euros at 4:30 p.m. in Paris. The stock has gained nearly 9 percent this year.
The deal is the largest of its kind in Europe, the Middle East and Africa this year, according to data compiled by Bloomberg, surpassing Bayer AG's sale of Covestro AG stock.
Banks that are left with stock after a sale they managed typically sell it in the market. They can make a profit or loss on their position depending on how the company's shares are trading. The average daily volume in BNP Paribas over a year is about 4.2 million shares, or nearly 300 million euros worth of stock traded daily at current market prices, according to data compiled by Bloomberg.
French Election
The sale came on the night of the only head-to-head debate of the French poll campaign, in which presidential candidate Marine Le Pen took on her rival Emmanuel Macron ahead of the election on May 7.
The prospect of a Le Pen victory has been among the biggest sources of uncertainty for Europe's banks this year, as her popularity sparked fears France would leave the single currency, triggering its disintegration and forcing lenders to re-denominate their assets.
Belgium's sale Wednesday allowed it to take advantage of a rally in BNP Paribas's stock as it neared a post-crisis high. The EURO STOXX Banks Index has gained about 9 percent since the first round of French elections last month.
--With assistance from John Martens Gavin Finch and Gaurav Panchal
To contact the reporters on this story: Ruth David in London at rdavid9@bloomberg.net, William Canny in London at wcanny3@bloomberg.net.
To contact the editors responsible for this story: Elisa Martinuzzi at emartinuzzi@bloomberg.net, Amy Thomson, Jon Menon
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