French banking group BPCE is reportedly in exclusive negotiations to acquire Novo Banco, a Portuguese lender, from Lone Star Funds.

The deal, if materialised, could value Novo Banco approximately €7bn ($8.09bn).

This development means that an initial public offering for Novo Banco may no longer be considered, reported Bloomberg.

In February this year, Lone Star indicated plans to the Portugal government to sell a 25-30% stake in Novo Banco through an IPO, according to Portugal’s Finance Minister Joaquim Miranda Sarmento.

Discussions are ongoing, and no final agreements have been reached, meaning the situation could evolve, reported the news agency.

Representatives from Lone Star and Novo Banco have declined to comment, and BPCE’s spokesperson did not respond to inquiries outside of regular business hours in Paris.

According to Bloomberg News, BPCE has emerged as the primary contender for the acquisition, surpassing Spain’s CaixaBank.

If the sale proceeds, it would contribute to the total of $27bn in banking acquisitions reported this year, according to the media outlet’s data.

Lone Star Funds currently holds a 75% stake in Novo Banco, while the Portuguese government retains a 25% interest through various entities, including the Resolution Fund.

The potential acquisition by BPCE, which includes subsidiaries such as Banque Populaire and Natixis, could enhance cross-border banking consolidation in Europe, despite recent governmental resistance to such transactions.

Novo Banco is said to be Portugal’s fourth-largest lender and recorded its first profit in 2021, benefiting from increased net interest income as central banks raised interest rates.

The bank has also worked to reduce its non-performing loan ratio, which was one of the highest in Europe following its emergence from the breakup of Banco Espirito Santo SA ten years ago.