Fortis describes itself as providing complete banking and insurance services for individuals, businesses, and institutions. Specifically, the bank provided retail, commercial, and merchant banking services. Insurance services included life insurance, health insurance, and property coverage. Formerly based in Belgium and the Netherlands, Fortis was, at the end of 2007, the world’s 20th largest corporation. Its income was reported to be €120.5 billion with a net profit of €4.35 billion. At that time it had over 62,000 employees. It is, at the end of 2008, a worldwide company with offices in 50 countries and employing over 50,000 people. Further, while several parts of the company retain the name of Fortis, they are in fact, components of this company that have now been sold.
Fortis came into being in 1990 as the result of a merger of companies, some that had originated in the early 18th century. These companies were at first, AMEV, a Dutch insurer and a Dutch banking group, VSB. Later in the same year a Belgian insurer, AG, joined the new organization. It was the first cross-border financial services deal in Europe’s history. The new name, Fortis, was selected in the following year and was chosen because of the Latin meaning of the word: “strong.”
In the mid-1990s, Fortis embarked on a program of acquisitions. Fortis purchased MeesPierson NV, a portion of the Dutch bank, ABN AMRO, that specialized in investment banking. Later Fortis purchased a
Belgian banking and insurance company, Algemene Spaar en Lijfrentekas, Caisse General d’Epargne et de Retraite. By 2007 Fortis had also acquired the Pacific Century Insurance Holdings and a Polish Bank, Dominet. Fortis had also partnered with the Irish Postal Service to provide financial services.
Fortis then embarked on its largest deal and the one that would eventually lead to the company’s demise. Fortis joined with two other banks, Royal Bank of Scotland and Banco Santander, to execute what was the largest bank acquisition in history with the partners paying €98 billion. It was also the first cross-border hostile takeover of a bank. Together, the three banks purchased the Dutch Bank ABN AMRO, with the idea that once it was acquired, the three partners would dismember the organization, each taking the parts that fit its own core business best. For its investment of €24 billion, Fortis received ABN AMRO’s Dutch consumer banking as well as asset management and private banking units. Because of the long history and reputation of ABN AMRO, the name would be kept.
The acquisition was announced in October 2007 and generated a great deal of interest; from the beginning there were some doubts about the wisdom of the deal. For one thing, the partners, according to some analysts, had paid up to three times the actual book value of ABN AMRO. Some of these analysts predicted that because of the amount of the purchase price, the companies had to show good results in a fairly short period of time, 18 to 24 months.
The results did show up in a very short time but not in the way that the partners had planned. Santandar made out the best as it was able to sell its acquisitions quickly. Royal Bank of Scotland did not do so well, but Fortis, with its capital depleted by the sale, ran into trouble almost immediately. In July 2008, the CEO of Fortis, Jean Votron, resigned to be replaced for a little over two months by a member of the board of directors. The value of the company at that time was estimated to be one third of what it had been before the acquisition.
By the end of September, when a new CEO was named, Fortis was partially nationalized by the Belgian, Luxembourg, and Dutch governments, which paid over €11 billion. The parts of ABN AMRO still under Fortis control would not be integrated into Fortis but would be sold. Parts of Fortis’s Belgian operations would be sold to BNP Paribas and would keep that name (hence the company Web page and communications with the Fortis name).
- “‘Flabbergasted’ CEO at Fortis Is Replaced,” Wall Street Journal (Eastern Edition) (September 27, 2008);
- Fortis, www.fortis.com (cited March 2009);
- “FORTIS: The Search for Global Fortune,” Marketing Week (November 15, 2007);
- “Netherlands Takes Over Fortis’s Dutch Operations,” New York Times (National Edition) (October 4, 2008);
- “Triple Play; ABN AMRO,” Economist (October 13, 2007);
- Thijs Westerbeek van Eerten, “Fortis: Pride Comes Before a Fall?” Radio Netherlands, www.radionetherlands.nl (cited March 2009).
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