Dutch takeover of Fortis began right after first deal

By Reed Stevenson

AMSTERDAM (Reuters) - After joining Belgium and Luxembourg to partially nationalise Fortis (FOR.BR) a week ago, the Dutch government was already taking steps to expand its involvement and take over the troubled financial group's Dutch businesses, sources familiar with talks said on Saturday.

Fortis was effectively broken up along national lines on Friday night, as the Dutch government agreed to buy the Dutch banking and insurance activities of Fortis for 16.8 billion euros (13.1 billion pounds), including ABN AMRO, the Dutch bank it bought last year.

The deal replaces a previous Benelux rescue package to partially nationalise Fortis and the Belgian government appeared ready to take similar steps over the weekend to nationalise or sell the Belgian parts of Fortis.

Sources familiar with the Dutch government's activities in the past week said efforts to nationalise Fortis began as it became clearer a day after the initial rescue that confidence was not being restored.

"Talks began after it became clear the situation was not getting better," a source close to the government said.

Dutch banking and insurance rival ING (ING.AS) had been tagged as a potential buyer for Dutch bank ABN, which Fortis bought nearly a year ago in a consortium with Royal Bank of Scotland (RBS.L) and Banco Santander (SAN.MC), but ING pulled out of talks on Monday, saying that a deal "would not meet its financial requirements."

After losing a third of their value in the week before the first rescue package, Fortis shares fell a further 24 percent on Monday to lows not seen since 1991 just after it listed.

Moreover, Dutch Finance Minister Wouter Bos said the second state rescue was made necessary by "increasing liquidity problems in banking activities" including cash withdrawals and other banks refusing to lend to Fortis, but he declined to specify which was greater.