London: Royal Bank of Scotland Group Plc., Santander Central Hispano SA and Fortis on Tuesday have offered €71.1 billion (almost Rs4 trillion) for ABN Amro Holding NV, trumping Barclays Plc. in the largest banking takeover.
The banks would pay €38.40 a share for the biggest Dutch lender, raising the cash portion to 79% from 70% in an earlier proposal, the group said. That’s 10% above the €34.87 all-stock offer from London-based Barclays.
The Royal Bank-led group pledged to cut costs by €4.23 billion by the end of 2010, 50% more than Barclays. The group plans to carve up the 183-year-old ABN Amro, which has operations in 53 countries, including India. The outcome may hinge on winning ABN Amro’s LaSalle Bank, the Chicago-based unit at the centre of a court fight.
“It’s going to be tough for Barclays to top this,” said Dave Bradbury, who helps manage $13 billion (Rs52,000 crore) in assets, including Royal Bank and Barclays shares, at Canada Life Ltd in London. “Maybe Barclays can find a partner.”
ABN Amro shares slipped 1% to €35.75 at 1.53pm in Amsterdam. Fortis shares fell 0.6% to €31.13 in Brussels. Santander shares rose 0.4% to €13.80 in Madrid. Royal Bank shares fell 2% to 630 pence in London, while Barclays rose 0.4% to 722.5 pence.
Sell or split: Rijkman Groenink, CEO of ABN Amro Holdings NV
Royal Bank CEO Fred Goodwin, on a conference call with reporters, said that “it would be rash to think” no other bidders will emerge for ABN Amro.
Buying ABN Amro would help Santander, Spain’s No. 1 bank, expand into Italy and double its market share in Brazil, where it’s the second-largest foreign-owned bank behind ABN Amro. Fortis, based in Brussels and Utrecht, the Netherlands, is seeking the Dutch retail and commercial banking arm and ABN Amro’s asset-management and private bank units to create a “top European financial institution,” the bank said on Tuesday.
ABN Amro owns Banca Antonveneta in Italy, Banco Real in Brazil and a 9% stake in Rome-based Capitalia SpA, which has agreed to be bought by UniCredit SpA, Italy’s biggest bank. Goodwin said the group would “liquidate” the Capitalia stake.
Royal Bank will pay €27.2 billion, Fortis €24 billion and Santander €19.9 billion in the transaction, the group said in a statement. To finance the purchase, Royal Bank will issue about €15 billion of new stock to ABN Amro shareholders, and raise an additional €6 billion of capital. Fortis plans to raise €15 billion by selling shares in a rights offer and up to €5 billion in additional capital. It will also “release” up to €8 billion by selling assets and securities. Santander is to raise €10 billion through a rights offer and the sale of mandatory convertible securities.
Barclays CEO John Varley, 51, has said he wants to create “one of the best banks in world” by joining with ABN Amro. He has contrasted his offer to the “deconstruction” of ABN Amro proposed by the Royal Bank group “into heaven knows how many parts.”
“There is nothing surprising in today’s development,” Varley said in a letter to employees today that was confirmed by Barclays. “We will be reviewing the detail,” of the rival group’s proposal. Barclays said last week it was making “excellent progress” with regulatory filings related to its bid.
“Barclays probably will make a higher offer, but they will have to justify the synergies,” said Edward Collins, a London-based fund manager who helps oversee about $41 billion at New Star Asset Management Group Plc. “€40 a share would be a bit too much. If Barclays start to sell bits and pieces of the business it would undermine the rationale for doing the deal.”
ABN Amro CEO Rijkman Groenink put the lender up for sale after London-based hedge fund TCI Fund Management LLP called for a breakup of the bank in February. At the annual shareholder meeting in April, more than two-thirds of ABN Amro shareholders backed a TCI motion urging management to consider selling or splitting up the company. A spokesman for TCI didn’t immediately respond to a message left on his mobile phone.
The Royal Bank-led group said it currently expects the offer for ABN Amro to begin by 13 August and to conclude in the final three months of the year. The bidders plan to make a further statement about the transaction with an updated timetable on or before the week of 2 July.
Martijn van der Starre and Jeroen Molenaar in Amsterdam contributed to this story.