By J Quintanilha and B Livesey, Bloomberg
Amsterdam: Barclays Plc, the third-biggest UK bank, and ABN Amro Holding NV, the largest Dutch bank, agreed to some initial merger terms, setting the stage for what may be the biggest financial-services takeover in history.
The new company would be led by a chief executive officer nominated by London-based Barclays and the chairman would be picked by the board of ABN Amro, the companies said in separate statements yesterday. The head office would be based in ABN Amro’s hometown of Amsterdam.
“These aren’t the most important issues,” said Rene Bastiaenen, a money manager at Amsterdam-based Eureffect BV, which holds ABN Amro shares. “The important issues are the price, the strategy, and what kind of synergies ABN Amro and Barclays can generate considering they have little overlap.”
Together, Barclays and ABN Amro would rank as the world’s sixth-largest bank with a combined market value of more than $160 billion, placing just behind New York-based JPMorgan Chase & Co. Takeover discussions are gaining momentum, though the companies reiterated yesterday that negotiations are at an early stage.
“By disclosing some details, perhaps they just want to send a signal to the market for now that they are serious about these talks,” Bastiaenen said.
In addition to questions about the CEO, Barclays, the third-biggest UK bank, said in the statement that shares of the new company would trade primarily on the London Stock Exchange and discussions about the deal were initiated with regulators in the UK and the Netherlands.
Simon Maughan, a London-based analyst at Blue Oak Capital Ltd., said he was surprised that Barclays, led by Chief Executive Officer John Varley, would agree to have the head office in Amsterdam.
“For a global bank to move from an international banking center to a global backwater does seem to be a rather big concession,” said Maughan, who has had a “sell’ rating on Barclays for the past five months.
ABN Amro’s stock rose 3.5 % yesterday to a record 31 euros in Amsterdam, increasing the company’s market value to 59 billion euros ($78 billion). Shares of ABN Amro are the best performers this year in the 72-member Bloomberg Europe Banks and Financial Services Index, up 26 %. Shares of Barclays climbed 3.7 % yesterday to 702 pence.
TCI Fund Management, the hedge fund that called for the breakup of ABN Amro, yesterday said the Dutch bank should seek other takeover offers rather than limit negotiations to Barclays.
ABN Amro should consider bids from “other credible institutions” to produce the highest gains for shareholders, said Paul Kaju, a spokesman for TCI, in an e-mailed statement.
Barclays made its approach after ABN Amro Chief Executive Officer Rijkman Groenink failed to meet the targets for investor returns that he established six years ago when he said the company would rank among the top five of the world’s 20 biggest banks. ABN Amro is now 16th by his measure.
The combined company would have $3.2 trillion of assets and about 230,000 employees. ABN Amro is the No. 1 bank in the Netherlands and its next largest markets are in Italy, the US Midwest and Brazil. In all, it has more than 4,500 branches in 53 countries.
“A significant barrier to the deal being done has been cleared,” said Ed Collins, a London-based fund manager at New Star Asset Management Group Plc, who helps manage about $34 billion and owns Barclays shares. “Deciding the personalities involved is almost as important as deciding on the price. It shows a willingness on both sides for the negotiations to continue positively.”