ABN drops support for Barclays' bid

THE HAGUE: Dutch bank ABN Amro said on Monday it would recommend neither of two mammoth takeover offers and was withdrawng its backing for a bid from Barclays over a rival proposal by a three-bank consortium.

It said its board of directors and its supervisory board were “not currently in a position to recommend either offer for acceptance to ABN Amro shareholders”.

“The boards are therefore, notwithstanding their support of the strategic benefits of the combination with Barclays, not currently in a position to recommend from a financial point of view the Barclays offer for acceptance to ABN Amro shareholders,” the bank said in a statement. The bank had earlier recommended the Barclays offer over that of a European consortium led by Royal Bank of Scotland (RBS).

In London, Barclays chief executive John Varley said the bank understood the position taken by the ABN boards. “We recognise that, at the current time, it is difficult for the boards of ABN Amro to make a clear recommendation to their shareholders,” he said.

“However, we are pleased to have their continuing support, and we are confident that our revised offer delivers the value, stakeholder benefits and certainty that will allow the boards to support a recommendation in due course.”
With investment pledges from powerful state-linked finance institutions in China and Singapore, Barclays last week sweetened its offer, including a cash component as part of a revised informal bid worth about e67.5 billion ($93.3 billion). But ABN Amro said the value of the Barclays’ offer, which is mostly in shares, was still less than that of the consortium. The RBS consortium, which also comprises the Dutch-Belgian group Fortis and Banco Santander of Spain, has formally offered 71.1 billion euros.

Two weeks ago, the consortium ramped up the cash part of its mammoth bid to 93% in an attempt to beat Barclays. But ABN Amro said it could not support the offer, fearing it could trigger a break-up of the Dutch bank. It also voiced concern that shareholders of RBS and Fortis might not approve the bid.

Either takeover would represent the world’s largest acquisition in the banking sector. On Monday, ABN Amro also presented its second quarter results and reported a 7.1% drop in its net profit to e1.13 billion. Despite the slide, the results were better than forecasts. In 2006, the second quarter results were boosted by an exceptional gain of 208 million euros while in the second quarter this year, the bank faced a one-off loss of 4 million euros, which explained part of the drop. Operational income was up 12.8% to e5.45 billion.

“We are well on track to deliver earnings per share of at least 2.30 euros on an adjusted basis as the change in the organisational structure implemented in 2006 created the conditions for improvement in our performance,” ABN Amro chairman Rijkman Groenink said in a statement. ABN Amro shares opened with a gain of 0.17% at 35.07 euros on the Amsterdam exchange. Fortis rose 0.13% to e29.27.