RBS raises stakes in race for ABN Amro
Royal Bank of Scotland turned up the heat on rival Barclays after today sweetening the terms of its £48.2 bn (€71bn) offer for Dutch bank ABN Amro.
RBS, along with consortium partners Spain’s Santander and Belgium-Dutch group Fortis, kept its offer at €71.1bn but said it would now pay 93% of the consideration in cash in an attempt to trump Barclays’ agreed £45bn (€66bn) merger deal.
The increase in the cash element – up from 79% – means the consortium will pay €66bn (£44.7bn) in cash, with the remaining payable in RBS shares.
The revised offer follows a Dutch court ruling last week to allow the sale of ABN’s Chicago-based LaSalle banking operations to Bank of America to go ahead without shareholder approval.
RBS’ initial bid was conditional on the inclusion of the business, but chief executive Fred Goodwin said today the group had not considered pulling out following the court’s decision.
“Going ahead without LaSalle is as attractive as going ahead with it,” Goodwin said.
“We would have preferred to get LaSalle but we are not going to get it.”
Under the proposed deal, the consortium will split ABN’s assets with RBS taking the cash from the LaSalle sale along with the group’s institutional banking business. Santander would take ABN’s Italian and Brazilian operations, while Fortis would grab its retail banking arm in the Benelux countries.
Fred highlighted the opportunities available from ABN’s corporate banking business.
“This is a business that services the day-to-day needs of corporates around the world, which would make us, combined with our own business, one of the pre-eminent corporate banks in the world.”
He added he was anxious to press ahead with the bid process.
However, analysts widely expect Barclays to come back with a renewed offer proposal for the Amsterdam-based bank. It is thought that Barclays could stump up an extra £2.7bn (€4bn) from the potential cost savings following a merger.
Opinion appears to be split over who has the most to lose as the price for ABN rises.
Bear Stearns warned the revised offer from RBS may be a knockout blow to Barclays’ chance of winning ABN due to the cash component of the new offer. It believes Barclays should walk away.
At the same time, Howard Wheeldon, senior strategist at BGC Partners, said the RBS offer proposal looks “an expensively priced bid” which risked incurring shareholder “wrath”.
He said he believed Fred should walk away from the bid battle, adding he saw “Barclays as the most likely winner of this now long-running and potentially damaging banking acquisition contest”.
Barclays chief executive John Varley said: “We are very clear that we will only proceed with this transaction on terms which produce the right results for our shareholders.
“We have high benchmarks for returns and we will not compromise them.”
ABN Amro has backed the Barclays offer as it is reported to be keen to keep the banking operations together under a merger to create the world’s fifth largest bank, rather than see a “dismantling” of the business proposed by the RBS consortium. ABN said today it was studying the consortium’s bid proposal.
Barclays and the RBS-led group have until July 23 to table formal offers for ABN.
