Royal Bank Consortium Set to Table Euros71bn Bid for ABN Amro

By IAN McCONNELL BUSINESS EDITOR

A ROYAL Bank of Scotland-led consortium is today expected to table a formal Euro-71bn (GBP48bn) offer for ABN Amro – nearly Euro- 8bn more than rival suitor Barclays’ agreed bid for the Dutch bank.

Royal’s parallel talks with Bank of America about splitting ABN’s US subsidiary, LaSalle, are not expected to have yielded a significant breakthrough in time for today’s announcement from the consortium, but it is understood this line of communication remains open.

Royal and its partners, Santander of Spain and BelgianDutch insurer and bank Fortis, are meanwhile understood to have kept ABN posted on key developments, including the Bank of America discussions, as they have moved to formalise their joint break-up bid for the Dutch bank.

The consortium will be hoping ABN will find its bid sufficiently persuasive to put it to shareholders along with the rival offer from Barclays.

ABN chief executive Rijkman Groenink has made plain his preference for Barclays’ offer because this would not involve a wholesale break-up of the Dutch bank.

However, even in the event that there is continuing reluctance on the part of ABN after today, the consortium might be hoping investors in its bid target will exert pressure on their directors to be allowed to vote on the competing bids for their company. The consortium has not only signalled it would pay a much higher price than Barclays but, in contrast to its London-based rival’s all- share bid for ABN, it has said it would offer 70-per cent cash and the remaining 30-per cent in Royal shares.

The consortium’s offer is expected to be pitched at the Euro- 38.40-a-share level signalled last month. Barclays’ bid was last night worth Euro-34.24-a-share.

However, the bid from the Royal camp would seem likely to contain significant conditions, and it might be that ABN seizes on these and legal issues as justification for retaining its recommendation of Barclays’ bid.

Conditions in the consortium offer would be likely to take account of the legal knots in which ABN has tied itself and its suitors by agreeing a sidedeal, aimed at helping facilitate the friendly Euro-63bn takeover by Barclays, to sell LaSalle to Bank of America for dollars21bn (GBP10.6bn). This deal has been frozen by the Dutch Commercial Court, which ruled on May 3 that investors must approve it, but ABN and Bank of America have appealed this decision.

LaSalle has been a key motivation for Royal in plotting the break- up bid for ABN with its consortium partners because this Chicago- based business would fit well with the Scottish bank’s existing US operation, Citizens Financial.

ABN’s agreement to sell LaSalle was viewed widely as a “poison pill” aimed at thwarting the Royal consortium when it was announced with the friendly Barclays deal on April 23.

Royal’s talks with Bank of America are aimed at trying to find a way through this legal minefield. The Royal consortium is expected to provide some general update on these discussions today.

However, it is likely to be too early for these talks to have produced a substantive result.

The Royal consortium is also expected at this stage to be at pains not to close down any options and to keep channels of communication open with both ABN and Bank of America.

It is believed to have been in periodic contact with ABN as it has moved to formalise its offer, updating the Dutch bank on its strategic thinking from time to time.

There would seem to be no benefit to the Royal consortium in adopting a more hostile stance at this stage. It would seem far more sensible to continue to deal courteously with ABN meantime and, even if the Dutch bank is reluctant, to rely if necessary on already- rebellious shareholders of the Amsterdam-based institution to help persuade Groenink and his fellow directors to return to the negotiating table. While Royal spent about a week looking over ABN’s books in late April and early May, the offer expected today might also be conditional on access to more detailed information.

The consortium would seem likely to want the same level of access to information and senior ABN executives as Barclays.

Royal and its partners said on Friday that they had secured an extension, until today, to provide an update on their previously- flagged intention to bid forABN because of Bank Holiday weekends in the UK, the Netherlands, and Belgium.

The consortium is also likely to spell out the financing behind its offer today. This financing issue has been a bone of contention between the Royal camp and ABN. While the expected tabling of the consortium offer will be a very significant development in the protracted battle for ABN, resolution of the fight still looks a long way off.

ABN’s decision to sell LaSalle to Bank of America has made it far from a straightforward auction.

The Dutch Supreme Court has said it aims to rule by midJuly on ABN and Bank of America’s appeals of the May 3 ruling. This Dutch Commercial Court ruling followed an action by Netherlands shareholder group VEB. The Children’s Investment Fund, a UK hedge fund, has been among ABN shareholders to have urged the Dutch bank’s directors to consider the Royal bid seriously.

Bank of America has meanwhile filed a lawsuit against ABN in New York seeking damages and an injunction against the sale of LaSalle to a rival – arguing that it believed the Dutch bank had the authority to dispose of the business without investor approval.

Under the consortium’s desired break-up of ABN, Royal would take LaSalle and the Dutch institution’s corporate banking business and its Asian operations. If successful, the deal would almost certainly be Royal’s second-biggest acquisition, exceeded only by its GBP21bn purchase of National Westminster in 2000.

Fortis wants ABN’s lowland European retail banking business and asset management activities, as well as its upmarket private client banking business. Santander is interested in ABN’s operations in South America, including Brazil, and in Italy.

Santander’s part in the consortium has been led by the Spanish bank’s chairman, Emilio Botin, who is a longtime ally of Royal chief executive Sir Fred Goodwin. Botin joined Goodwin and Fortis chief executive Jean-Paul Votron to launch publicly the consortium’s tilt at ABN at Royal’s annual meeting last month.

At that stage, the consortium indicated the price it would be willing to pay but stopped short of tabling a formal offer.

(c) 2007 Herald, The; Glasgow (UK). Provided by ProQuest Information and Learning. All rights Reserved.