In France's long tradition of cozy corporate relationships, few were closer than the ties between insurance group Axa and investment bank Paribas.
Axa Chairman Claude Bebear sat on the board of Paribas, the No. 1 investment bank in France. Paribas Chairman Michel Francois-Poncet sat on the board of Axa, one of the world's largest insurance companies. Axa owns 7.6 percent of Paribas stock; Paribas advised on and assisted many Axa financial transactions.
So when Paribas agreed in January to merge with French retail bank Societe Generale, Bebear blessed the $18 billion marriage, voting for it at the board meeting.
Then came the earthquake.
Banque Nationale de Paris roared in March 10 with a hostile offer to take over both Paribas and Societe Generale, in a share swap valued at $38 billion. Saying France needed bigger banks to compete internationally -- the combination would form the biggest bank in the world in terms of assets -- BNP was undeterred by the opposition of its targets.
And it found an ally: Bebear. He switched sides, voted for the BNP offer and urged the rest of the Paribas board to follow suit.
The French business establishment was stunned. BNP's hostile bid and Bebear's reversal were unprecedented in a country where the companies, like the government, are run by graduates of two elite schools. The battle is the latest of many signs that capitalism here is becoming just like capitalism everywhere: cutthroat, not cozy; global, not local.
"France, whatever its leaders say, is becoming just like everyone else. French business is slowly moving toward the references of international business," said Christopher Potts of the Paris brokerage Chevreux de Virieu. Bebear "is going with the flow."
Indeed, no businessperson in France better represents the new world than Bebear, 63, who in 20 years has built Paris-based Axa from an obscure mutual insurance firm into the world's second-largest asset manager. Among other jewels in Axa's crown are Equitable Cos. and the U.S. brokerage Donaldson, Lufkin & Jenrette.
"In the United States, when Warren Buffett invests somewhere, it's seen as smart money. His dollar is worth more than the dollar of Mr. Smith," said Laurent Treca, director of development for BNP. "It is the same with Claude Bebear in France."
In the case of Paribas and its potential new owners, Bebear (pronounced Bay-bay-AR) said he was just doing his job.
It was "pure corporate governance," he said in an interview. "As a board member, I have to look at the interests of stockholders and decide which offer is best."
Today, a French appeals court upheld the legality of BNP's bid. Societe Generale earlier this week upped its offer for Paribas to $20 billion, and BNP may well respond with a counteroffer as early as Friday. As the battle unfolds, the most watched stockholder will without question be Bebear.
There was speculation when Bebear made his position clear that he and BNP Chairman Michel Pebereau -- who is on Axa's board -- had hatched the takeover offer together. Bebear denied that and suggested instead that some of his countrymen just aren't used to the new world. In the field of finance, "everything used to be smooth," he said. "There was no tradition of hostile takeovers. It's new."
Indeed, the first major hostile takeover in France was launched in 1986. The takeover artist: Bebear, who succeeded in getting Axa to acquire another French insurer.
He always knew he wanted to be an entrepreneur, Bebear explained in fluent English, but in his youth, he did not understand precisely what that meant. In the France of 30 years ago, conspicuous displays of wealth were disdained, and corporate executives, unconstrained by securities regulation, were free to hide profits from tax inspectors, employees and the public.
"In French companies at that time, keep in mind that to be profitable was a sin," he said. "The problem was to hide the profits."
At the age of 23, he was hired by Ancienne Mutuelle, a small insurance company in Rouen, as the designated successor to the founder. The company owned a small subsidiary in Canada, where Bebear worked for two years. The culture shock was tremendous.
"I discovered that there was another way of thinking, and that the system in France was not the system of the future," he said. "In Canada, everyone was talking about profits. . . . It was a totally different ambiance."
He became chairman in 1975 and began buying. In 1986, already planning a global presence, Bebear changed the company name to the more universally pronounceable Axa. In 1994, Axa took a controlling interest in Equitable, with which it had been allied since 1991. (The investment adviser was Paribas.) Though Equitable was struggling, the additional exposure to the American financial scene also enhanced Axa's profit-oriented view of the world.
"We had to convince the [American] markets we knew what we were doing," said Francoise Colloc'h, head of human resources and synergies.
In 1996, Axa acquired UAP, an ailing, formerly government-owned French insurance giant, and vaulted into the ranks of the world's biggest insurers. "We too can be the best in the world," said the headline on a magazine profile of Bebear at the time. The same year, Axa was listed on the New York Stock Exchange.
With Axa's growth came a higher profile. The company, through its portfolio investing, controls 2 to 3 percent of the shares traded on the Paris Bourse, France's stock exchange.
In the past three years or so, more French companies have adopted such new -- for them -- good-corporate-governance practices as quarterly reports, meetings with analysts and prompt communication of financial changes. Credit for promoting these reforms is often given to American and other institutional investors, who own as much as 50 percent of the shares of some major French companies. (All the players in the Paribas drama, including Axa, are more than 40 percent owned by foreign investors.)
But domestically, analysts say, Bebear has also played a role, particularly in the financial world, where consolidation is long overdue.
"Everyone assumed it was the government that would fashion financial restructuring according to the national interest," said Potts, the Paris broker. "Now we see it is people like Axa, according to their own strategic interest."
Indeed, analysts say that Axa, which is not interested in offering retail financial services, needs a huge bank to partner with in the coming years. In backing the BNP offer, Bebear is angling to create such a bank.
He says only that his goal is to protect the stockholders' interest. His spokeswoman says that he will decide how to use Axa's 11.9 percent voting weight in Paribas when the time is right, based on all available information.
Is he the Warren Buffett of France? Bebear permits himself a touch of pride in responding.
"Warren Buffett is a pure investor," he said. "He tried to manage a company once -- Salomon Brothers -- and it failed. As an investor he's fantastic. . . . I manage a group. It's not the same thing."
Claude Bebear, financial retooler
Born: Issac, France
Education: Graduated from Ecole
Polytechnique in 1958
Career highlights: From 1958 to 1975, held various positions at a small insurance company, Ancienne Mutuelle. Founded the life insurance branch of Provinces Unies, a subsidiary of Ancienne Mutuelle. In 1975, became chairman of Ancienne Mutuelle, which was renamed Axa in 1986 after the acquisition of stock insurance company Drouot. Among other companies Axa has acquired:
1986: Providence (a hostile takeover)
1988: Compagnie du Midi
1994: Controlling interest in the Equitable Cos. in the United States, which owns most of brokerage Donaldson, Lufkin & Jenrette.
1995: National Mutual in Australia
1996: UAP, a French insurance company
SOURCE: Securities Data Co.
CAPTION: Claude Bebear says it was a revelation to work in Canada, where "everyone was talking about profits."
CAPTION: Claude Bebear, second from left, attends a luncheon of the Franco-American Businesses Council in Paris last Friday. With him are Michael Bloomberg, left, founder and CEO of Bloomberg News; Dana G. Mead, CEO of Tenneco; French President Jacques Chirac; Michel Bon, CEO of France Telecom; and John Welch, CEO of General Electric.