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Barclays wins shareholder backing for ABN AMRO bid
By James Kanter International Herald Tribune
Friday, September 14, 2007
The British bank Barclays won shareholder backing on Friday for its offer for ABN AMRO of the Netherlands, now worth about €58 billion. But a rival bid and ongoing turbulence in financial markets left the outcome of the world's biggest banking battle still uncertain.
The chief executive of Barclays, John Varley, said a tie-up with ABN AMRO still made sense because it offered "growth, certainty and deliverability." But he acknowledged that the $80 billion offer, which is mostly in shares, had lost value since a recent slump in bank stock prices due to the crisis over risky mortgage loans in the United States.
Varley said the offer now was worth about €5.50 less per share than another offer by Royal Bank of Scotland, Fortis Group of Belgium and Banco Santander Central Hispano. Theirs is worth about €70 billion.
Varley said Barclays was "prepared to walk away" if it failed to strike a deal with ABN AMRO on the right terms - a strong hint Barclays would not raise its bid. But he also said the fight was far from over because the share price of ABN AMRO was significantly trailing the rival bidders' offer price.
In a normal situation, the price of ABN AMRO should have jumped to match the best offer price, but some analysts say investors are skeptical that the consortium will be able to raise the money for its bid in current market conditions.
"The stock market, which is seldom wrong about these things, is indicating at the moment that the outcome is far from certain," Varley said.
ABN AMRO next week will issue a so-called reasoned opinion, which will compare the offers by Barclays and by the consortium, although it may not necessarily make a recommendation on which offer shareholders should accept.
Analysts said ABN AMRO probably would be even-handed in its assessment of the bids, in part to maintain Barclays as a rival to the consortium.
"With Barclays sitting there, the consortium is not likely to be ready to lower its price," said Julian Chillingworth, a fund manger at Rathbones in London.
ABN AMRO had previously recommended the bid by Barclays, but the board changed its stance to neutral in July because of the change in valuations.
A spokesman for ABN AMRO, Neil Moorhouse, said Friday that the opinion would be issued at least four days before ABN AMRO shareholders gathered for an extraordinary general meeting, which is scheduled for Thursday. Shareholders will discuss the offers at the meeting, but no vote will be held.
The offer by Barclays would include a strategic alliance with China Development Bank and Temasek Holdings of Singapore, the result of a three-way financing deal reached in July.
The bid by the Royal Bank of Scotland consortium is mostly cash and would result in a breakup of the Dutch lender.
Some investors have said the bid led by the Royal Bank of Scotland group could be appealing to hedge funds investing in ABN AMRO because it is mostly in cash.
Yet that bid hinges on the approvals of shareholders of all three bidders involved in the consortium.
They have until Oct. 4 to tender shares to Barclays and until Oct. 5 to the consortium.
Even as the struggle for control of ABN AMRO continues, Barclays may be seeking a new potential merger partner in case its offer fails, some analysts said.
"It's a classic rule that who ever has a failed takeover behind him is now a takeover target himself," said Herman Bots of Theodoor Gilissen Bankiers in Amsterdam. "Barclays may be saved from this for now as mergers and acquisition activities have cooled because of the recent troubles in the credit market, but that calm may only last one or two months."
Bots said he thought Citigroup could make an offer for a stand-alone Barclays, while Barclays could make offers for Bank of Ireland and the Scandinavian bank Nordea.
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