Finance News

Bidding war for ABN Amro begins

Royal Bank of Scotland, the British bank, and two other European lenders offered €72.2 billion for ABN AMRO on Wednesday, sparking the biggest takeover battle yet in the banking industry.

The Scottish bank, together with Banco Santander Central Hispano, the largest bank in Spain, and Fortis, a Belgian banking group, offered €39, or $53.18, a share in stock and cash for ABN, the largest Dutch bank. The offer, 70 percent in cash and the rest in stock, is worth a total of $98.5 billion; it tops the €36.25-a-share offer that Barclays made Monday by about 13 percent.

"The banks believe that the potential transaction will create stronger businesses with enhanced market positions," the consortium said in a statement announcing the new offer, "and growth prospects in each of ABN AMRO's main markets." "The banks believe that execution risk would be lower than in a transaction with Barclays," the statement said. The proposal also includes ABN's final 2006 dividend of 60 euro cents a share.

The bid is contingent on ABN's keeping LaSalle Bank, its U.S. subsidiary, which Royal Bank of Scotland has identified as one of the Dutch bank's most attractive assets. It is also subject to ABN's opening up its books in full for inspection by the bidding group.

ABN said Monday that it had agreed to sell LaSalle to Bank of America, in what was widely seen as a move by ABN's board to torpedo any new bid. The deal reportedly angered Royal Bank and some dissident ABN shareholders.

A successful acquisition by the three-bank group would be likely to lead to a breakup of the ABN banking conglomerate, allowing the most valuable portions to be distributed among the consortium partners. ABN's board has repeatedly said it opposes such a move.

Rijkman Groenink, the ABN chief executive, has also said he prefers a combination with Barclays, which would create one of the biggest global banks, rather than any deal that would divide the lender into pieces.

Analysts have argued that the opposition to splitting up ABN means that the takeover will not be decided on price. Groenink said Monday that the Barclays option offered the best possible long-term value for shareholders.

Nonetheless, shareholders may still opt for the higher takeover offer, analysts said. The Children's Investment Fund, an activist hedge fund with a stake in ABN whose pressure on the bank's management to focus on shareholder value triggered the takeover talks with Barclays this year, said Wednesday that the three-bank group's offer was "compelling."

The London-based fund, which owns less than 3 percent of ABN, also called on the Dutch lender to allow the three-bank group full access to the financial information it has given Barclays. The fund also wants the ABN board to recommend the latest offer and terminate the sale of LaSalle.

Source: International Herald Tribune
Date: 26.04.2007 [ID: 20]