Reports: Societe Generale Considers Newedge Buy-Out

According to a recent report by Reuters, Societe Generale is considering buying out Credit Agricole’s 50% stake in their jointly owned prime broker, Newedge.

“SocGen, which previously has wanted to sell its 50% stake in Newedge, is now looking at buying the whole business,” said an unnamed source in an interview with Reuters. “After trying to sell it, it became obvious that they weren’t going to get a good price, so now it’s about doing the next best thing.”

Newedge has reportedly been put up for sale since as early as 2011, but has struggled to find a buyer amidst falling profits and a tough economic environment; Societe Generale also experienced a fourth quarter loss last year due in large part to significant write-downs of goodwill on Newedge.

According to one of Reuter’s sources, SocGen and Credit Agricole have yet to reach agreement on a price, although the value of the total business is estimated to be between €800 million to €1 billion.

The source added that SocGen—which has kicked off a drive to cut €900 million in costs through 2015—is giving priority to flow products, or the trading of low-risk securities that consume little capital, and believes that taking over Newedge would fit into this strategy.

Newedge is a rated provider in Global Custodian’s Prime Brokerage survey, where in 2012, one client made note of the ownership structure amid the turbulence in Europe. “Given [the] current environment, i.e., shaky confidence in European banking sector, they could be more proactive in demonstrating their safety/ solidity/ownership,” the client said.

Requests for comment from Societe Generale and Credit Agricole were not returned; Newedge refused to confirm the report.