ABN Amro backs €67bn bid from Barclays
By Peter Thal Larsen in London, Ian Bickerton in Amsterdam and David Wighton in New York
Copyright The Financial Times Limited 2007
Published: April 22 2007 19:48 | Last updated: April 23 2007 14:28
ABN Amro on Monday agreed to be taken over by UK rival Barclays in an all-share deal that values the Dutch group at €67bn (£45.4bn, $90.9bn) or €36.25 a share, as a rival bid led by Royal Bank of Scotland stalled.
The offer, which represents a 33 per cent premium to the Dutch bank’s share price the day before the two banks said they were in talks a month ago, will result in ABN’s US business LaSalle being sold to Bank of America for $21bn.
The last-minute inclusion of LaSalle, the 12th largest US bank by assets, in the deal appears to have wrong footed a rival consortium being led by Royal Bank of Scotland and including Fortis, the Belgo-Dutch financial group and Spanish Bank Santander.
The consortium was due to meet with ABN Amro on Monday but postponed the meeting to consider the cost of breaking up the agreement with Bank of America.
“In view of ABN Amro’s decision to sell LaSalle Bank to Bank of America, the Banks need to understand the circumstances under which this sale can be terminated,” it said in a statement.
Barclays and ABN Amro have proposed to return €12bn, or 91 euro cents a share, to shareholders of the new group from the LaSalle sale in the form of a buyback.
Under the terms of the agreement ABN shareholders will receive 3.225 ordinary Barclays shares and own 48 per cent of the new enitity to be called Barclays Plc, while Barclays shareholders will own the remaining 52 per cent of what will become one of the largest financial services groups in the world.
John Varley, Barclays chief executive, will remain chief of the combined group and Arthur Martinez will become chairman of the enlarged bank which will be regulated by the Financial Services Authority.
“This proposed merger represents a unique opportunity to create a new competitive force in financial services, which will deliver benefits for our customers and clients and generate sustained growth and additional value for our owners,” said Mr Varley.
The combination, which has taken a month to agree, is the largest proposed financial services deal to date. It would create a group with 46m personal banking customers and 1.4m commercial clients with operations in eight countries including the emerging markets of Brazil and South Africa, as well as Spain, Italy and Portugal.
The two banks have targetted savings of €3.5bn by 2010, largely from job cuts which they said would total 23,600 or 10 per cent of the combined workforce.
Analysts at Keefe, Bruyette & Woods said they expect RBS to say it was surprised that the board of ABN has chosen to recommend Barclays’ offer before receiving the details of its rival offer.
The chief executives of RBS, Santander and Fortis are expected to outline a proposal that would offer shares in RBS with the other two banks contributing cash. It remains unclear how Santander and Fortis would finance their part of the offer, though analysts expect both banks to raise substantial amounts of equity from their own shareholders.
Under the terms of the deal with Barclays, ABN Amro will retain the right to consider any higher offers. ABN Amro’s supervisory board, which has been threatened with legal action by The Children’s Investment Fund, the activist hedge fund, has taken extra care in recent days to make sure it is following the correct procedures.
Hopes for a higher bid lifted ABN’s shares more than 2 per cent in Amsterdam trading above the offer price to €37.10. Barclays shares fell, reversing earlier gains, on concerns the ambitious savings targets would not be met and Barclays’ shares would be diluted. In early afternoon trading shares in the UK bank were nearly 2 per cent or 14p lower at 736p. ABN share rose 1 per cent to €36.64 on hopes a rival bid would top Baclays’ agreed offer.
Shares in Bank of America, which will become Chicago’s largest financial services group if the deal succeeds, slipped 9 cents to $50.95 on cornerns the US bank was over paying fro the Dutch bank’s American assets.