By Ben Livesey and Jon Menon, Bloomberg
London; ABN Amro Holding NV agreed to meet with takeover bidders led by Royal Bank of Scotland Group Plc, threatening Barclays Plc’s plans for the world’s biggest financial- services acquisition.
London-based Barclays, the No. 3 UK bank, will hold exclusive talks for the rest of the week to buy ABN Amro. “There can be no certainty that they will lead to a transaction or what form it will take,” the companies said in a joint statement today. The Amsterdam-based bank said it will sit down with Royal Bank executives early next week.
ABN Amro is opening the door to a bidding competition two months after shareholder TCI Fund Management LLP said the biggest Dutch bank was “significantly undervalued” and called for a sale or breakup. ABN Amro shares rose 33 % in the past month to 36.40 euros, valuing it at 69.5 billion euros ($94.3 billion).
“Shareholders expect the board to pursue the best transaction -- merger, sale or breakup -- which will maximize shareholder value,” TCI founder Christopher Hohn said in a statement today. The Royal Bank approach “makes it imperative that shareholders insist on an open and fair process,” said Hohn.
London-based TCI requested a shareholder vote at the annual meeting on 26 April on whether the bank should be split up. ABN Amro shareholders have until 20 April to register their votes.
Edinburgh-based Royal Bank, Spain’s Santander Central Hispano SA and Fortis, based in Brussels and the Dutch City of Utrecht, asked ABN Amro on 13 April for “exploratory talks.”
“We look forward to the meeting and outlining our proposals, which we believe offer significant value for our respective shareholders,” Royal Bank spokeswoman Carolyn McAdam said in an interview today.
ABN Amro shares rose by 2.3 % to 36.40 euros in Amsterdam today. The top price Barclays could pay is 35 euros, according to the mean estimate of six analysts surveyed by Bloomberg.
Barclays, led by Chief Executive Officer John Varley, is “unlikely to match the offer of the consortium” led by Royal Bank, which can generate more job and cost cuts from a deal, Jean- Pierre Lambert, a London-based analyst at Keefe, Bruyette & Woods Ltd. said in an e-mail yesterday.
‘Problem for Barclays’
“It becomes a problem for Barclays as the ABN Amro price rises,” said David Dodds, an investment analyst at SVM Asset Management in Edinburgh who helps oversee about $1.2 billion, including Royal Bank stock. “The market is saying Barclays cannot make the same cost savings as the consortium.”
The Royal Bank-led group may be able to pay about 40 euros a share for ABN Amro in a breakup of the 183-year-old bank, according to four analysts surveyed by Bloomberg.
Royal Bank has a history of winning fights, having elbowed aside Edinburgh-based rival Bank of Scotland in 2000 to buy National Westminster Bank Plc for 23.6 billion pounds ($47 billion) after a five-month battle. Barclays may struggle to match Royal Bank’s record of cutting costs. It managed to cut 18,000 jobs and integrate NatWest ahead of schedule.
“Of course a bid from RBS is a good thing,” said Helmut Hipper, who helps oversee $184 billion at Union Investment in Frankfurt. “ABN should be talking to them and giving them access to the data room,” said Hipper, who owns Barclays, ABN Amro, Royal Bank, Fortis and Santander shares.
Barclays has planned to create Europe’s second-biggest bank behind HSBC Holdings Plc by taking over ABN Amro. The combination would double Barclays’ revenue from consumer banking and put it in 53 countries, including retail branches in the Netherlands, Brazil, the US and India for the first time.
Varley has yet to disclose a price or additional terms of the deal after a month of negotiations.
“Three days on top of one month is nothing,” said Alain Tchibozo, an equity analyst at ING Groep NV in Paris. “It means they don’t know what to do, they’re in trouble.”