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Royal Bank-Led Group Bids $98.5 Billion for ABN Amro
Wednesday, April 25, 2007
Royal Bank of Scotland Group Plc, Santander Central Hispano SA and Fortis offered 72.2 billion euros ($98.5 billion) to buy ABN Amro Holding NV, sparking the biggest takeover battle in the financial-services industry.
The Royal Bank-led group offered 39 euros a share, with 70 percent in cash and 30 percent in stock, the companies said in a statement today. The group said its approach is 13 percent higher than the all-stock bid ABN Amro accepted from Barclays Plc two days ago. Barclays's bid was worth 67 billion euros at the time.
The fight for control of Amsterdam-based ABN Amro, which has branches in 53 countries, centers on its LaSalle unit in Chicago. ABN Amro and Barclays elbowed Royal Bank Chief Executive Officer Fred Goodwin aside by agreeing to sell LaSalle to Bank of America Corp. for $21 billion. The banks today said their offer depends on that sale being canceled.
``This is obviously the much more attractive offer,'' said Thomas Radinger, a fund manager at Pioneer Investments in Munich. He helps oversee $69 billion and holds ABN Amro shares. ``Barclays may be able to cough up one or two euros more but that would be very hard to justify to shareholders.''
The purchase would be the third-biggest ever behind America Online Inc.'s $186 billion acquisition of Time Warner Inc. in 2000 and Vodafone AirTouch Plc's $185 billion accord with Mannesmann AG in 1999.
`Counter-Punch'
Shares of ABN Amro, the biggest Dutch bank, rose 4.8 percent in Amsterdam as of 1:55 p.m., valuing it at 70 billion euros. The stock has surged 34 percent since it announced takeover talks a month ago. Barclays shares rose 2.5 percent to 730.5 pence in London and those of Royal Bank slipped 1.8 percent to 1,976 pence.
The joint offer values ABN Amro at about 15.3 times 2006 earnings. Barclays said its offer was worth 14.2 times earnings. JPMorgan Chase & Co. analyst Kian Abouhossein in London downgraded ABN Amro to ``neutral,'' saying shareholders should take profit now amid legal uncertainty over the LaSalle sale.
``It's a good counter-punch from RBS,'' said Sandy Chen, an analyst at Panmure Gordon in London who has a ``buy'' rating on Royal Bank. ``The offer of 70 percent cash looks good compared with the 100 percent shares offer of Barclays. It increases the risk of value dilution for Barclays shareholders should they wish to counter-bid.''
`Straightforward Proposals'
Edinburgh-based Royal Bank, the second-biggest U.K. bank after HSBC Holdings Plc, and its partners will break up the 183 year-old ABN Amro if their bid beats the offer from Barclays, the U.K.'s No. 3 bank.
``The banks are of the clear view that their proposals are superior for ABN Amro's shareholders and are straightforward from a shareholder, regulatory and execution perspective,'' the Royal Bank-led group said today. It called its offer a ``price indication'' and said ABN Amro has agreed to discuss it further.
ABN Amro and Barclays disclosed their negotiations on March 19. The Royal Bank-led group said April 13 that it asked for ``exploratory talks.'' Two days ago, ABN Amro agreed to Barclays's offer of 3.225 new shares for each share of ABN Amro, amounting to 36.25 euros a share as of April 20. The offer also includes Barclays's final dividend for 2007.
ABN Amro spokesman Piers Townsend, Barclays spokesman Alistair Smith and Fortis spokeswoman Liliane Tackaert declined to comment today.
`Compelling Offer'
TCI Fund Management LLP called today's approach ``compelling.'' The London-based hedge fund, which owns almost 3 percent of ABN Amro, has asked shareholders to pressure ABN Amro's board at its annual meeting tomorrow to break up the bank. In an interview, founder Chris Hohn urged ABN Amro to accept Royal Bank's bid and scrap the LaSalle sale.
Royal Bank's Goodwin has a history of winning fights, having beaten Edinburgh-based rival Bank of Scotland in 2000 for National Westminster Bank Plc. NatWest shareholders accepted Royal Bank's hostile 23.6 billion-pound ($46.8 billion) offer after a five-month battle.
``With Royal Bank now involved, it's going into a longer timescale,'' said Julian Chillingworth, who helps manage $21 billion at London-based Rathbone Brothers Plc and holds Barclays shares. ``We don't expect it to be resolved soon.''
`Deconstruction'
When the accord with Barclays was announced April 23, ABN Amro CEO Rijkman Groenink said the three banks were ``out for deconstruction'' of ABN Amro. He said he would consider higher offers.
Royal Bank would probably hold on to ABN Amro's Asian, North American and corporate-banking business, Stephen Andrews, an analyst at UBS AG in London, wrote in a note April 16. The LaSalle unit would fit with Royal Bank's Citizens U.S. unit.
Under ABN Amro's agreement to sell LaSalle to Charlotte, North Carolina-based Bank of America, a counter-bidder has 14 days to submit a higher offer in cash. Bank of America then has five days to match the bid.
``It's turning into a battle,'' said Pieter Wind, head of securities at ING Private Banking in Amsterdam, which oversees $14.9 billion, including ABN Amro shares.
Buying ABN Amro would help Santander Chairman Emilio Botin expand into Italy and double the Spanish lender's market share in Brazil, where it's the second-biggest foreign-owned bank behind ABN Amro, according to Andrews.
Both Santander, Spain's largest bank, and ABN Amro hold stakes in Capitalia SpA, Italy's No. 4 lender. The Dutch bank bought Italy's Banca Antonveneta at the beginning of last year.
`Close Attention'
Fortis, Belgium's biggest financial-services company, which is based in Brussels and the Dutch city of Utrecht, would be able to create a regional banking network with the Dutch businesses of ABN Amro. Fortis, run by Jean-Paul Votron, may keep ABN Amro's asset-management arm, Andrews wrote.
``We continue to follow developments with close attention,'' Tobias Oudejans, a spokesman for the Dutch central bank, said in an interview today. The central bank said April 18 a joint offer would be more complicated and risky than a takeover by a single bank.
Dutch shareholder association VEB said in a statement that the group's demands, including due diligence and keeping LaSalle within ABN Amro, are ``reasonable'' and it will ask the Dutch bank to comply with them.
Barclays may switch ``from predator to prey'' if it fails to win ABN Amro, said Howard Wheeldon, senior strategist for BGC Partners, a London-based brokerage firm.
Merrill Lynch & Co. is advising the Royal Bank of Scotland group. ABN Amro is being advised by Lehman Brothers Holdings Inc., Morgan Stanley, N.M. Rothschild & Sons Ltd., UBS and its own investment bank. Morgan Stanley and UBS each provided a fairness opinion to the management board. Goldman Sachs Group Inc. gave a fairness opinion to ABN Amro's supervisory board.
`Looming Battle'
Barclays was advised by Citigroup Inc., Credit Suisse Group, Deutsche Bank AG, JPMorgan Cazenove and Lazard Ltd., as well as Barclays Capital.
``ABN Amro has let slip the dogs of war and getting them back in the cage is going to be extremely difficult,'' Bear Stearns Cos. analyst Christopher Wheeler said in an interview.
The Royal Bank-led group offered 39 euros a share, with 70 percent in cash and 30 percent in stock, the companies said in a statement today. The group said its approach is 13 percent higher than the all-stock bid ABN Amro accepted from Barclays Plc two days ago. Barclays's bid was worth 67 billion euros at the time.
The fight for control of Amsterdam-based ABN Amro, which has branches in 53 countries, centers on its LaSalle unit in Chicago. ABN Amro and Barclays elbowed Royal Bank Chief Executive Officer Fred Goodwin aside by agreeing to sell LaSalle to Bank of America Corp. for $21 billion. The banks today said their offer depends on that sale being canceled.
``This is obviously the much more attractive offer,'' said Thomas Radinger, a fund manager at Pioneer Investments in Munich. He helps oversee $69 billion and holds ABN Amro shares. ``Barclays may be able to cough up one or two euros more but that would be very hard to justify to shareholders.''
The purchase would be the third-biggest ever behind America Online Inc.'s $186 billion acquisition of Time Warner Inc. in 2000 and Vodafone AirTouch Plc's $185 billion accord with Mannesmann AG in 1999.
`Counter-Punch'
Shares of ABN Amro, the biggest Dutch bank, rose 4.8 percent in Amsterdam as of 1:55 p.m., valuing it at 70 billion euros. The stock has surged 34 percent since it announced takeover talks a month ago. Barclays shares rose 2.5 percent to 730.5 pence in London and those of Royal Bank slipped 1.8 percent to 1,976 pence.
The joint offer values ABN Amro at about 15.3 times 2006 earnings. Barclays said its offer was worth 14.2 times earnings. JPMorgan Chase & Co. analyst Kian Abouhossein in London downgraded ABN Amro to ``neutral,'' saying shareholders should take profit now amid legal uncertainty over the LaSalle sale.
``It's a good counter-punch from RBS,'' said Sandy Chen, an analyst at Panmure Gordon in London who has a ``buy'' rating on Royal Bank. ``The offer of 70 percent cash looks good compared with the 100 percent shares offer of Barclays. It increases the risk of value dilution for Barclays shareholders should they wish to counter-bid.''
`Straightforward Proposals'
Edinburgh-based Royal Bank, the second-biggest U.K. bank after HSBC Holdings Plc, and its partners will break up the 183 year-old ABN Amro if their bid beats the offer from Barclays, the U.K.'s No. 3 bank.
``The banks are of the clear view that their proposals are superior for ABN Amro's shareholders and are straightforward from a shareholder, regulatory and execution perspective,'' the Royal Bank-led group said today. It called its offer a ``price indication'' and said ABN Amro has agreed to discuss it further.
ABN Amro and Barclays disclosed their negotiations on March 19. The Royal Bank-led group said April 13 that it asked for ``exploratory talks.'' Two days ago, ABN Amro agreed to Barclays's offer of 3.225 new shares for each share of ABN Amro, amounting to 36.25 euros a share as of April 20. The offer also includes Barclays's final dividend for 2007.
ABN Amro spokesman Piers Townsend, Barclays spokesman Alistair Smith and Fortis spokeswoman Liliane Tackaert declined to comment today.
`Compelling Offer'
TCI Fund Management LLP called today's approach ``compelling.'' The London-based hedge fund, which owns almost 3 percent of ABN Amro, has asked shareholders to pressure ABN Amro's board at its annual meeting tomorrow to break up the bank. In an interview, founder Chris Hohn urged ABN Amro to accept Royal Bank's bid and scrap the LaSalle sale.
Royal Bank's Goodwin has a history of winning fights, having beaten Edinburgh-based rival Bank of Scotland in 2000 for National Westminster Bank Plc. NatWest shareholders accepted Royal Bank's hostile 23.6 billion-pound ($46.8 billion) offer after a five-month battle.
``With Royal Bank now involved, it's going into a longer timescale,'' said Julian Chillingworth, who helps manage $21 billion at London-based Rathbone Brothers Plc and holds Barclays shares. ``We don't expect it to be resolved soon.''
`Deconstruction'
When the accord with Barclays was announced April 23, ABN Amro CEO Rijkman Groenink said the three banks were ``out for deconstruction'' of ABN Amro. He said he would consider higher offers.
Royal Bank would probably hold on to ABN Amro's Asian, North American and corporate-banking business, Stephen Andrews, an analyst at UBS AG in London, wrote in a note April 16. The LaSalle unit would fit with Royal Bank's Citizens U.S. unit.
Under ABN Amro's agreement to sell LaSalle to Charlotte, North Carolina-based Bank of America, a counter-bidder has 14 days to submit a higher offer in cash. Bank of America then has five days to match the bid.
``It's turning into a battle,'' said Pieter Wind, head of securities at ING Private Banking in Amsterdam, which oversees $14.9 billion, including ABN Amro shares.
Buying ABN Amro would help Santander Chairman Emilio Botin expand into Italy and double the Spanish lender's market share in Brazil, where it's the second-biggest foreign-owned bank behind ABN Amro, according to Andrews.
Both Santander, Spain's largest bank, and ABN Amro hold stakes in Capitalia SpA, Italy's No. 4 lender. The Dutch bank bought Italy's Banca Antonveneta at the beginning of last year.
`Close Attention'
Fortis, Belgium's biggest financial-services company, which is based in Brussels and the Dutch city of Utrecht, would be able to create a regional banking network with the Dutch businesses of ABN Amro. Fortis, run by Jean-Paul Votron, may keep ABN Amro's asset-management arm, Andrews wrote.
``We continue to follow developments with close attention,'' Tobias Oudejans, a spokesman for the Dutch central bank, said in an interview today. The central bank said April 18 a joint offer would be more complicated and risky than a takeover by a single bank.
Dutch shareholder association VEB said in a statement that the group's demands, including due diligence and keeping LaSalle within ABN Amro, are ``reasonable'' and it will ask the Dutch bank to comply with them.
Barclays may switch ``from predator to prey'' if it fails to win ABN Amro, said Howard Wheeldon, senior strategist for BGC Partners, a London-based brokerage firm.
Merrill Lynch & Co. is advising the Royal Bank of Scotland group. ABN Amro is being advised by Lehman Brothers Holdings Inc., Morgan Stanley, N.M. Rothschild & Sons Ltd., UBS and its own investment bank. Morgan Stanley and UBS each provided a fairness opinion to the management board. Goldman Sachs Group Inc. gave a fairness opinion to ABN Amro's supervisory board.
`Looming Battle'
Barclays was advised by Citigroup Inc., Credit Suisse Group, Deutsche Bank AG, JPMorgan Cazenove and Lazard Ltd., as well as Barclays Capital.
``ABN Amro has let slip the dogs of war and getting them back in the cage is going to be extremely difficult,'' Bear Stearns Cos. analyst Christopher Wheeler said in an interview.
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Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective.The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it.& take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations given in this blog.
