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. Last Updated: 07/27/2016

Agricole Bids $20Bln for Lyonnais

PARIS -- Credit Agricole launched a friendly 19.5 billion euro ($19.9 billion) bid for Credit Lyonnais on Monday in a deal that would create a new French banking giant, rivaling BNP Paribas for the top spot in the 12-country euro zone.

Based on a statement released by the CMF French market regulator, Agricole will offer five of its own shares plus 148.24 euros for every four Lyonnais shares held -- the equivalent of 56 euros per Lyonnais share.

The offer values Lyonnais at just over 19.5 billion euros, a 6 percent premium to the Friday closing share price of Lyonnais, and that pushes up to 19.9 billion euros once existing stock options are taken into consideration.

Agricole, which will pay out a maximum of 66.18 percent of the bid in cash, has secured the backing of core Lyonnais shareholders AGF, Commerzbank, BBVA and IntesaBci for its offer.

Together those shareholders hold about 21.2 percent of total Lyonnais capital, giving Agricole 38.6 percent of its target once its own 17.4 percent stake is included.

"I think the deal is a good one for Agricole," said Jonathan Spread, banks analyst at Morley Fund Management in London. "Lyonnais was a prime, scarce asset, the price does not look horrendous and the strategic fit is good."

The bid, which was approved at board meetings of the two banks on Sunday evening, throws down the gauntlet to BNP, which sparked a tussle for control of Lyonnais when it snapped up the French government's 10.9 percent stake in the bank in a hastily called auction three weeks ago.

Initially slow to react, Agricole went on the offensive in recent weeks, appointing chairman Rene Carron to pursue Lyonnais and pushing up its stake in the bank to 17.4 percent with aggressive purchases on the open market.

As signs emerged last week that Lyonnais was warming to a deal with Agricole, BNP said it would not stand in the way of a friendly deal between the two provided an Agricole offer was "acceptable" to all parties.

But BNP could still come back with a higher bid if it deems the Agricole offer too low or sees opposition from Lyonnais shareholders or staff to the deal.

BNP, which declined official comment, was holding a previously scheduled board meeting Monday at which it was expected to decide on a response.

"BNP will examine all aspects of any Agricole offer," said a source familiar with the bank's position Sunday. "BNP is keeping its options open."

With a market value of 18.4 billion euros, Credit Lyonnais has turned itself around since bad loans brought the bank close to bankruptcy and forced a costly government bailout in the mid 1990s. Last year it posted a net profit of 812 million euros on net banking income of 6.73 billion euros.

Agricole, the largest retail player in France with roughly 20 percent of the deposit market, has long been keen to get its hands on the strong urban retail business of Lyonnais to complement its own predominantly rural network.