Consortium trumps Britain's Barclays in a battle for the world's biggest bank takeover.
A consortium led by Royal Bank of Scotland has launched a 71.1 billion euro ($95.7 billion) bid for Dutch group ABN AMRO, trumping Britain's Barclays in a battle for the world's biggest bank takeover.
In a long-awaited move, the RBS-led group of banks said on Tuesday they had raised the cash element of their offer from their original proposal but that the bid was conditional on the disputed purchase of ABN's U.S. bank arm.
The offer was pitched at 38.40 euros per ABN share - 30.40 euros in cash plus 0.844 new shares in RBS. It could pressure Barclays to raise its all-share offer, currently valued at 64 billion euros.
"This deal offers better value for ABN shareholders, and we anticipate the consortium winning control," said Alex Potter, an analyst at Collins Stewart in London.
But ABN shares dipped 0.4% to 36 euros in early trading, given than the offer was as indicated a month ago.
The consortium of RBS, Fortis and Santander has so far been rebuffed by ABN management, which has agreed to a takeover by Barclays.
The consortium said it would prefer to agree on a deal with ABN's management but indicated it would go direct to shareholders if necessary. It said it expected its offer to be put alongside the Barclays takeover proposal in any takeover vote put to ABN's investors.
"All of the bids should go before shareholders, and they should allow shareholders to decide in an environment of having as level a playing field as can be," Fred Goodwin, RBS chief executive, told reporters on a conference call.
Goodwin said the backing of about 70% of ABN's shareholders last month for a proposal to sell or merge parts of its business indicated support for the consortium's proposal. "I don't think they could have been much clearer," he said.
By 0745 GMT Barclays shares firmed 0.5% to 723-1/2 pence. RBS shares fell 1.6% to 632p, while Fortis slipped 0.8% and Santander firmed 0.8%.
LASALLE STICKING POINT
The banks said a condition of their offer is that the deal includes the purchase of ABN's U.S. arm, LaSalle Bank, which ABN agreed to sell to Bank of America for $21 billion at the same time that it agreed to be taken over by Barclays.
A Dutch commercial court has blocked the LaSalle sale, however, saying ABN shareholders should vote on it. A Dutch Supreme Court is likely to rule on the deal by mid-July.
Goodwin said the banks had held "amicable and professional" discussions with Bank of America regarding LaSalle but that they had not resulted in an agreement.
Asked whether he would consider splitting LaSalle's assets between RBS and Bank of America, Goodwin declined to comment on specific details but said:
"We'd be willing to have a sensible discussion with Bank of America."
In light of the uncertainty, a cash payment of 1 euro per ABN share - or 1.9 billion euros - would be deferred depending on the outcome of the situation, the banks said.
The consortium estimated aggregate cost savings of 4.2 billion euros and profit enhancements from revenue benefits of 1.2 billion euros from the deal by the end of 2010.
The proposed offer is not subject to any financing condition, with deals to raise capital fully underwritten by adviser Merrill Lynch and sub-underwritten.
"It's been a long running saga to question the financing, but there's even more cash in the deal now than before, so financing has not been an issue,"
RBS's share of the deal would be 27.2 billion euros, or 38%. Fortis would pay 24 billion euros, and Santander's share would be 19.9 billion.
Fortis intends to raise 15 billion euros through a rights issue and up to 5 billion euros of new Tier 1 capital and to release up to 8 billion euros of capital.
RBS plans to issue new shares worth about 15 billion euros to ABN shareholders, raise about 6 billion euros of new non-dilutive Tier 1 capital and finance the remainder of its share of the payment from internal resources.
Santander intends to raise 9.5 billion to 10 billion euros from a rights issue and convertible instruments and to finance the remainder through balance sheet optimisation, including leverage, incremental securitisation and asset disposals.