Amsterdam: Barclays Plc is in talks with ABN Amro Holding NV about a possible purchase of the largest Dutch bank in Europe’s biggest financial-services merger, according to a person familiar with the situation.
Barclays, the UK’s No. 3 bank, might offer about 60 billion euros (Rs3,51,995 crore) for Amsterdam-based ABN Amro, according to Keefe, Bruyette & Woods Ltd analyst Jean-Pierre Lambert. The discussions may not lead to a transaction, said the person, who declined to be identified because negotiations are still at an early stage.
Barclays Chief Executive Officer John Varley, 50, told analysts a month ago that he wants the London-based bank to grow “aggressively” and would consider purchases to enter emerging markets. Acquiring ABN Amro, which has branches in 53 countries and owns LaSalle Bank in Chicago, would help Barclays to extend retail banking outside the UK and build up its securities, asset- and wealth-management arms, Lambert said.
“It makes sense on a strategic and geographical basis,” said Guy de Blonay, a London-based fund manager at New Star Asset Management Group Plc, who helps oversee about $34 billion and holds shares of both companies. “Barclays is looking for something in Brazil, more in the US and wants to expand in Italy.”
Barclays spokesman Jason Nisse in London and ABN Amro spokesman Neil Moorhouse in Amsterdam declined to comment.
The Sunday Times reported yesterday that Barclays made an informal approach to ABN Amro. The Wall Street Journal said ABN Amro is resisting overtures from several unidentified suitors.
ABN Amro CEO Rijkman Groenink, 57, is fending off calls from investors including TCI Fund Management for the bank to be broken up as he works to rein in expenses from last year’s purchase of Italy’s Banca Antonveneta SpA and loan losses in the US, Latin America and Taiwan. The company relied on asset sales to increase fourth-quarter profit by 4.9% to 1.36 billion euros.
Shares of ABN Amro fell 0.6% to 27.29 euros in Amsterdam on 16 March, valuing the company at 52 billion euros. The stock has risen 7.4% in the past month, the best performer in the 72-member Bloomberg Europe Banks and Financial Services Index. Barclays shares fell 13% in the same period. ABN Amro’s price-to-earnings ratio inched up to 9.7 last week, just ahead of Barclays for the first time in a year.
ABN Amro’s stock has been fueled by takeover speculation since 21 February when TCI, a UK hedge fund that led the ouster of Deutsche Boerse AG’s top executives two years ago, said the bank is “significantly” undervalued.
“Looking at the sum of the parts, ABN Amro is a cheap stock,” New Star’s de Blonay said in an interview yesterday. He said he expects any bidder to offer at least 35 euros a share. A sale “would also be an easy solution for ABN, which is fighting off activist shareholders,” he said.
ABN Amro, the product of a 1991 merger of the two biggest Dutch banks, made half of its revenue last year from interest income on loans, a quarter from commissions, and most of the remainder from trading and investment banking.
The company got embroiled last month in a boardroom battle at Rome-based Capitalia SpA, where it is the largest shareholder. CEO Matteo Arpe won the backing of a group of shareholders led by ABN Amro just hours before the directors were scheduled to consider a motion to fire him.
Barclays said on 20 February that second-half net income jumped 41% to 2.26 billion pounds. Growth was spurred by the Barclays Capital securities unit under President Robert Diamond, 55, which accounted for about one third of pretax profit. The bank makes half of its profit outside the UK.
Emerging Market Exposure
“Our exposure to emerging markets is still quite low,” Varley said on a conference call when the bank reported earnings on 20 February. “We would like to increase our exposure to them.”
Shares of Barclays fell 0.7% to 682.5 pence on 16 March, giving the company a market capitalization of 44.6 billion pounds. The shares, which have more than doubled since March 2003, fell 14% from a record 790 pence on 23 February, hurt by industry-wide concerns about stock-market volatility and rising US mortgage defaults.
Barclays is the UK’s third-biggest bank after HSBC Holdings Plc and Royal Bank of Scotland Group Plc. HSBC shares fell 0.7% to 880 pence on 16 March, giving the London- based bank a market value of 102 billion pounds.
“If an offer by Barclays is confirmed, it’s likely to trigger counter offers” for ABN Amro, said Lambert, who has an “outpeform” recommendation on ABN Amro shares and a price target of 33 euros.