Royal Bank of Scotland’s (RBS) outline €72 billion (Rs4.1 lakh crore) bid has put Holland’s ABN Amro in a spot. RBS and its consortium partners—Belgian-Dutch Fortis and Spain’s Santander—are dangling far better terms in front of the Dutch bank than those it has agreed with Barclays. ABN would be failing its investors by sticking with Barclays unless the UK bank raises its offer.
The consortium members aren’t just proposing a better price. At €39 a share, their deal is worth 13% more than Barclays’ at Tuesday night’s closing prices. They are also paying about €50 billion in cash. ABN’s existing plans have a cash element of only €12 billion, raised from the sale of the group’s US bank, LaSalle. And even that would be shared roughly equally with Barclays’ investor.
What’s more, the RBS gang has got to grips with some of its credibility issues. It was easy to pick holes in their original plans. ABN investors would have been paid in paper from three banks, denominated in two different currencies. And, with all three banks taking equal roles, the scheme appeared difficult to deliver—consortium members would have had to stay strictly in step. That’s not such a problem now that RBS has taken the lead.
True, the consortium hasn’t answered all investors’ questions—notably in how it will raise the cash. Europe’s biggest rights issue so far, by UK telecoms group BT, raised less than €10 billion.
But as three of the continent’s biggest banks, they deserve some leeway. ABN would be wrong to stick blindly with Barclays’ offer, and the LaSalle sale, on which it is conditional —and which the consortium wants blocked.
Sure, RBS has the chance to outbid Bank of America, which has offered $21 billion (Rs86,100 crore) for LaSalle. But that hardly looks as lucrative for ABN investors as the proposed bid for the group, which tops Barclays by more than €8 billion. If ABN is unable to unwind the LaSalle sale, as people close to the Dutch bank are maintaining, its managers have behaved in a reprehensible fashion.