Santander, RBS bid EUR7.1bn for ABN Amro
30 May 2007, AMSTERDAM - ABN Amro received an industry record takeover bid of EUR 71.1 billion (US$95.5 billion) Tuesday from a group led by Royal Bank of Scotland PLC, but its shares fell as the Dutch bank's earlier decision to sell its U.S. arm to Bank of America still clouded prospects for a quick deal.
30 May 2007
AMSTERDAM - ABN Amro received an industry record takeover bid of EUR 71.1 billion (US$95.5 billion) Tuesday from a group led by Royal Bank of Scotland PLC, but its shares fell as the Dutch bank's earlier decision to sell its U.S. arm to Bank of America still clouded prospects for a quick deal.
The offer by the RBS-led consortium of 38.40 (US$51.59) per share, about 10 percent higher than the bid on the table from Britain-based Barclays PLC, is contingent on the LaSalle sale not going forward, and also sets aside around 1.85 billion (US$2.49 billion) to pay potential claims or a settlement to BofA.
What will happen next depends on who acts first: the courts or ABN Amro's shareholders.
The Netherlands' Supreme Court is to rule on an appeal against an order to freeze the LaSalle sale by early July. But with an offer from RBS on the table, ABN shareholders with at least a 10 percent stake could override management and call for a meeting in six weeks to voice their preference on the LaSalle sale or either offer.
Piers Townsend, a spokesman for ABN Amro, said Tuesday the bank had received the consortium's offer but declined to comment further.
"ABN Amro is not allowed to talk to us under the (conditions of) the BofA deal, and their board recommended the Barclays deal," said RBS Chief Executive Fred Goodwin. "Until they extricate themselves from those two situations, I think they're in a little bit of a difficult place."
Goodwin said the consortium has held "amicable" talks with Bank of America to find a compromise, but they have so far been unsuccessful.
The mostly cash offer by the RBS-led group for ABN Amro Holding NV is worth at least 10 percent more than the all-share offer from Barclays worth 34.88 (US$46.93) at current levels.
But ABN Amro's shares fell 0.8 percent to EUR 35.81 (US$48.18), suggesting investors have serious doubts about which bid will prevail.
Either deal, if successful, would be the largest banking takeover in history.
"We believe we have a particularly comprehensive strategic fit in all of the main markets in which ABN Amro is operating," said Goodwin, arguing that the consortium was a better fit than Barclays to invest in and expand ABN's businesses in the future. "We are tall and deep, and they are wide and thin," he said.
But what would appear to be a straightforward choice between the bids remains frozen due to a snap decision by ABN Amro's management last month to sell its U.S. arm, Chicago-based LaSalle Bank Corp., to BofA for US$21 billion (15.5 billion), with the proceeds going to Barclays as part of its deal.
That sale, negotiated in four days while the consortium bid was on the horizon, was widely seen as a poison pill measure, since RBS's primary interest is in LaSalle.
A Dutch court froze the sale of LaSalle, saying ABN Amro's management overstepped its bounds by attempting to sell it without shareholder approval. BofA then filed suit in a U.S. federal court, saying its purchase contract is enforceable under U.S. law.
The offer announced Tuesday reserves 1 (US$1.35) in cash per ABN share to pay potential claims or a settlement to BofA.
"We think this is the neatest and most straightforward way of addressing the issues that arise, whatever they may be, in relation to LaSalle," Goodwin said.
Analyst Jean-Pierre Lambert of Keefe, Bruyette & Woods predicted ABN will eventually present both bids to shareholders without a recommendation.
Peter Paul de Vries, director of shareholder rights group VEB, said shareholders should have a chance to vote within two months.
Barclays CEO John Varley has said the consortium offer amounts to a "carve up" of ABN: RBS will take LaSalle and ABN's investment banking operations; Fortis NV of Belgium wants ABN's Dutch and asset management operations; and Banco Santander Central Hispano SA of Spain will buy its Italian and Brazilian arms.
Goodwin countered that the consortium's division was a "blindingly obvious" one and that the banks "together expect to deliver benefits for ABN Amro stakeholders which they believe no single buyer of ABN AMRO could match."
Goodwin also rejected claims by ABN Chief Executive Rijkman Groenink that the consortium deal was more risky, saying it was actually less risky because each member will have less to swallow, and will be more expert in each of ABN's markets.
He added that fewer jobs would be lost or outsourced in the consortium offer than the 24,000 projected by Barclays and ABN in their agreement.
Bart Narter, who analyzes financial IT systems for Boston-based Celent, agreed with Goodwin's assessment that execution risks were lower in the RBS bid, as each of the consortium banks will be able to focus on individual markets where they have more expertise.
He said the preference of ABN Amro's management for the Barclays bid appeared to derive from "having ego invested in the ABN Amro name" and the fact that more upper management jobs would be spared in the Barclays merger.
"I think RBS should win" the bidding war he said. "But they're going to have to pay some legal bills."
[Copyright AP with Expatica]
Subject: Spanish news