And the chase goes on...

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ABN Amro shareholders must decide now

The road to the ABN Amro acquisition has been quite a peculiar one for Barclays. After initial speed bumps, the company would have expected a smooth ride, but till date, it’s hardly paydirt time! Blame the Royal Bank of Scotland (RBS) team, including Spain’s Santander & Belgian-Dutch Group Fortis, which gave an irresistible counter offer of $97.8 billion for the Dutch bank, and which led Barclays to increase their bid to $93.1 billion and include 37% cash in the earlier all-stock deal with help from China Development Bank & Singapore state investor Temasek Holdings. However, the amount still falls short of the RBS offer, which is over 90% cash. To top it all, the ABN Amro board, which earlier recommended the Barclays deal, has decided to take a neutral stance now.

The logic for a merger – no matter who gets the bounty – is pretty clear. A Barclay-ABN Amro combine will create Europe’s second largest bank after HSBC, with synergies in retail banking, securities & asset management operations. Moreover, they will be able to tap opportunities in the growing markets like Netherlands, Asia & Latin America. John Hitchins, UK Banking Leader, PricewaterhouseCoopers, explains, “A matured domestic market is one of the factors leading banks in Europe to merge, in order to get entry into new markets.” As far as the RBS consortium is concerned, they are looking to split the assets amongst themselves, which the ABN Amro board finds risky.

With the board now in a muddle, the ball is in shareholders’ court. If cash is what they want, RBS is the obvious choice. But would they be able to fathom seeing their beloved bank being broken up? Well, maybe they would too!

Edit bureau: Aditi Soni

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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