A consortium led by Royal Bank of Scotland has launched a 71.1 billion euro ($95.9 billion) bid for Dutch group ABN Amro, trumping Britain's Barclays in a battle for the world's biggest bank take-over.
In a long-awaited move, RBS and its partners Fortis and Santander said on Tuesday they had raised the cash element of their offer from an original proposal but the bid was conditional on being able to unpick ABN's sale of its US arm, LaSalle Bank. The offer was pitched at 38.40 euros per ABN share - 30.40 euros in cash plus 0.844 new shares in RBS.
The Barclays offer of 3.225 of its shares for every ABN share was worth around 64.4 billion euros on Tuesday, or just under 35 euros a share. "This (RBS) deal offers better value for ABN shareholders, and we anticipate the consortium winning control," said Alex Potter, an analyst at Collins Stewart in London.
But ABN's shares dipped 0.8 percent to 35.81 euros, as the RBS offer was similar to that indicated a month ago and as the consortium failed to resolve the dispute over LaSalle Bank. The consortium said it would prefer to agree a take-over with ABN's management but indicated it would go direct to shareholders if necessary. It said it expected its offer to be put alongside the Barclays offer in any take-over vote put to ABN's investors.
"All of the bids should go before shareholders, and they should allow shareholders to decide in an environment of having as level a playing field as can be," said Fred Goodwin, RBS's chief executive. ABN's shareholders had signalled support for the consortium's proposal at a vote last month, he said.
The RBS consortium said its offer would be pulled if it is unable to buy LaSalle, which ABN agreed in March to sell to Bank of America for $21 billion at the same time as it agreed to be taken over by Barclays.
A Dutch commercial court has blocked the LaSalle sale, however, saying ABN shareholders should vote on it. A Dutch Supreme Court is likely to rule on the deal by mid-July. Goodwin said the banks had held "amicable and professional" discussions with Bank of America regarding LaSalle but they failed to reach an agreement.
"There was a gap between the parties that didn't get bridged," Goodwin said. He declined to comment on speculation RBS may consider splitting LaSalle with Bank of America to reach a compromise, but said talks could restart. "We're in the market to solve them (outstanding issues) if they can be solved," he said.
A cash payment of up to 1.9 billion euros - or one euro of the offer price - would be deferred from the offer to pay for any costs related to settling the LaSalle dispute. Lawyers had indicated any costs relating to the issue should not exceed that, Goodwin said.
The consortium said it could achieve annual cost savings of 4.2 billion euros and profit enhancements from revenue benefits of 1.2 billion euros from the deal by the end of 2010. There would be fewer job cuts than the 23,600 redundancies estimated under the Barclays deal, the consortium said. The offer is targeted for completion in the fourth quarter.
It is not subject to any financing condition, with fundraising plans fully underwritten by adviser Merrill Lynch and sub-underwritten, the banks said. "It's been a long running saga to question the financing, but there's even more cash in the deal now than before, so financing has not been an issue," Goodwin said. He said the consortium's offer was "comprehensively" better than the Barclays offer and ABN's businesses fit neatly with the acquiring banks.
Under the offer RBS would get ABN's investment banking, US and Asian businesses. Santander would get Italian bank Antonveneta and ABN's Brazilian business, while Fortis wants to take over ABN's domestic operation to create the biggest retail bank in the Benelux region and also gets to expand its wealth and asset management business.
Barclays is aiming to create the world's fifth biggest bank through its take-over and sees ABN's fast growing Brazil and Asian markets as accelerating its own growth. Barclays Chief Executive John Varley said in a letter to his staff that the rival offer contained "nothing surprising". ABN said it was looking at the offer.
RBS shares fell 0.8 percent and Barclays rose 1.9 percent, reflecting greater expectation the consortium will win, dealers said. Santander added 1.3 percent and Fortis dipped 0.3 percent. RBS's share of the offer price would be 27.2 billion euros, or 38 percent. Fortis would pay 24 billion euros, and Santander's share would be 19.9 billion.
Fortis intends to raise 15 billion euros through a rights issue - which would be the biggest ever - with Santander planning a rights issue of 9.5 billion to 10 billion euros. RBS plans to issue shares worth about 15 billion euros to ABN shareholders. The three banks intend to pay for the rest of the deal mainly via debt, existing resources and some asset sales.
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