Barclays may add cash to boost ABN bid
Decision comes days after RBS-led consortium hiked the cash component in its bid.
By Agencies |
LONDON: Barclays, competing to buy ABN Amro Holding in the world’s biggest banking takeover, may sweeten its e64.7 billion ($89.3 billion) all-stock bid by adding cash.
The bank is weighing “alternative offer structures” and “a partial cash consideration,” London-based Barclays said in a statement on Thursday. The Dutch securities regulator agreed to give Barclays more time to formulate its bid, pushing back the deadline for an official offer to August 6 from July 23.
Barclays is pursuing ABN Amro, which has operations in 53 countries from Brazil to India, to create one of the world’s biggest ‘universal’ banks, Chief Executive Officer John Varley has said. Analysts question whether the bank can raise its bid enough to thwart the e71.1 billion offer of Royal Bank of Scotland Group, Banco Santander and Fortis.
“Barclays isn’t the highest bidder and it won‘t win a bidding war,” said Antony Broadbent, an analyst at Sanford C Bernstein in London who has an “outperform” rating on the stock. “The economically rational resolution is that the consortium buys ABN Amro.”
‘High Benchmarks’
The Royal Bank-led group, which intends to carve up ABN Amro, increased the cash portion of its bid to 93% on July 16. To win, Barclays would have to add a partner or agree to sell more ABN Amro assets, according to Broadbent, who said the bank should withdraw from the contest.
Barclays’ forecast gains from ABN Amro are lower than those of the Royal Bank group. The London-based bank says it can get about e3.5 billion in cost savings and increased revenue from ABN Amro by 2010. That compares with more than e4 billion forecast by Royal Bank and its partners over the period.
Little ‘Downside’
“I don’t think any of their shareholders want Barclays to overpay,” said Ed Collins, who helps manage about $41 billion, including Barclays’ stock, at New Star Asset Management Group in London. “There isn’t much downside to Barclays if they don’t do the deal.”
The group led by Edinburgh-based Royal Bank plans to divide ABN Amro’s businesses. Royal Bank would take the investment banking operations and Asia retail businesses. Santander, Spain’s biggest bank, would expand into Italy and double its market share in Brazil. Fortis, the largest Belgian financial-services company, is seeking the Dutch consumer banking arm and ABN Amro’s asset-management and private bank units.
The Royal Bank group’s revised bid excludes ABN Amro’s US unit after the Dutch Supreme Court last week upheld ABN Amro’s agreement to sell Chicago-based LaSalle Bank to Bank of America for $21 billion. The ruling followed a lower court decision which blocked the sale because it hadn’t received shareholder approval. Barclays made its initial bid on April 23, and was followed two days later by the Royal Bank-led group. Shareholders of Royal Bank, Santander and Fortis are scheduled to vote on the transaction in coming weeks.
‘Trying Their Hardest’
“They are clearly trying their hardest,” said Robert Talbut, investment chief at Royal London Asset Management, which oversees $62 billion including Barclays and Royal Bank stock.
“Barclays don’t want to walk away until it becomes clear that the consortium’s offer has satisfied all the regulator approvals,” said Talbut, who backs the Royal Bank-led group.
The bank is weighing “alternative offer structures” and “a partial cash consideration,” London-based Barclays said in a statement on Thursday. The Dutch securities regulator agreed to give Barclays more time to formulate its bid, pushing back the deadline for an official offer to August 6 from July 23.
Barclays is pursuing ABN Amro, which has operations in 53 countries from Brazil to India, to create one of the world’s biggest ‘universal’ banks, Chief Executive Officer John Varley has said. Analysts question whether the bank can raise its bid enough to thwart the e71.1 billion offer of Royal Bank of Scotland Group, Banco Santander and Fortis.
“Barclays isn’t the highest bidder and it won‘t win a bidding war,” said Antony Broadbent, an analyst at Sanford C Bernstein in London who has an “outperform” rating on the stock. “The economically rational resolution is that the consortium buys ABN Amro.”
‘High Benchmarks’
The Royal Bank-led group, which intends to carve up ABN Amro, increased the cash portion of its bid to 93% on July 16. To win, Barclays would have to add a partner or agree to sell more ABN Amro assets, according to Broadbent, who said the bank should withdraw from the contest.
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ABN Amro will meet with Barclays and the Royal Bank group to discuss “implications of the consortium’s revised proposed offer,” the Amsterdam-based bank said. Barclays will only proceed with its bid “on terms that produce the right results for our shareholders,” Mr Varley said on July 16. “We have high benchmarks for returns and we won’t compromise them.” Barclays’ forecast gains from ABN Amro are lower than those of the Royal Bank group. The London-based bank says it can get about e3.5 billion in cost savings and increased revenue from ABN Amro by 2010. That compares with more than e4 billion forecast by Royal Bank and its partners over the period.
Little ‘Downside’
“I don’t think any of their shareholders want Barclays to overpay,” said Ed Collins, who helps manage about $41 billion, including Barclays’ stock, at New Star Asset Management Group in London. “There isn’t much downside to Barclays if they don’t do the deal.”
The group led by Edinburgh-based Royal Bank plans to divide ABN Amro’s businesses. Royal Bank would take the investment banking operations and Asia retail businesses. Santander, Spain’s biggest bank, would expand into Italy and double its market share in Brazil. Fortis, the largest Belgian financial-services company, is seeking the Dutch consumer banking arm and ABN Amro’s asset-management and private bank units.
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The Royal Bank group’s revised bid excludes ABN Amro’s US unit after the Dutch Supreme Court last week upheld ABN Amro’s agreement to sell Chicago-based LaSalle Bank to Bank of America for $21 billion. The ruling followed a lower court decision which blocked the sale because it hadn’t received shareholder approval. Barclays made its initial bid on April 23, and was followed two days later by the Royal Bank-led group. Shareholders of Royal Bank, Santander and Fortis are scheduled to vote on the transaction in coming weeks.
‘Trying Their Hardest’
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Barclays could add cash to its offer without changing the value of the bid by selling debt or equity, Broadbent wrote on July 17. The bank could also try to sell parts of ABN Amro to increase the offer, though Barclays would probably find it “difficult” to find a buyer for the Dutch operations, wrote Broadbent. “They are clearly trying their hardest,” said Robert Talbut, investment chief at Royal London Asset Management, which oversees $62 billion including Barclays and Royal Bank stock.
“Barclays don’t want to walk away until it becomes clear that the consortium’s offer has satisfied all the regulator approvals,” said Talbut, who backs the Royal Bank-led group.
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