ABN Amro is not alone in thinking that breaking up is hard to do. Sure, the Dutch bank has put break-up proposals by The Children’s Investment Fund on the agenda of its annual meeting — ABN could have wriggled out of doing so by arguing that they weren’t in its best interests. But the bank has urged shareholders to vote against them.
That’s not an unreasonable position to take. True, a break-up could be lucrative. ABN might get good prices for prize assets such as Brazil, Asia or US-based LaSalle, which Bank of America has expressed an interest in.
But it would probably be left with a hard-to-sell rump containing such operations as wholesale banking. Cashing in the crown jewels might not just expose the full horror of the residue of ABN, but also trigger a tax bill on top.
Then there’s the risk of finding that the value isn’t there if lots of shared costs need to be duplicated in a break-up, and funding synergies are lost. But while ABN has an argument for resisting a break-up, that doesn’t mean it can just pursue a sweetheart deal with Barclays. It can justify selling itself a little way short of its break-up value, which Keefe, Bruyette & Woods puts at E35 a share. But leaving too much value on the table would risk short-changing shareholders.
The spin may be that ABN has already talked to everyone and that Barclays is the only serious bidder. But even if other banks weren’t tempted in the past, they may be now as Barclays has struck. Royal Bank of Scotland has signalled it might be interested. Citigroup appears to be having an internal debate about the merits of a bid. Entering exclusive negotiations with Barclays was a sensible way to hook an initial bidder—and Barclays demanded exclusivity as a condition of the talks. But exclusive talks shouldn’t make Barclays’ approach a walkover. By ruling out a break-up, ABN Amro’s Rijkman Groenink has denied himself one bargaining chip with Barclays. Ruling out rival bidders would deprive him of an even more valuable one.