ABN Amro takeover hots up, as RBS bids record 71.14 billion euros

LONDON - The Royal Bank of Scotland led a European consortium in a titanic attack against British rival Barclays on Tuesday with a record-breaking bid for Dutch target ABN Amro worth almost 100 billion dollars.
The formal consortium offer, worth 71.14 billion euros (95.64 billion dollars) and is mostly in cash, has outgunned Barclays' agreed all-shares bid of 67 billion euros. However, ABN Amro has yet to respond to the RBS offer.
The consortium, comprising also Banco Santander of Spain and Belgian-Dutch group Fortis, wants to break up ABN Amro. But Barclays is bidding to create a vast global group and the second-biggest bank in Europe after HSBC.
The RBS-led grouping forecast cost savings of 4.23 billion euros by the end of 2010, and additional profit of 1.22 billion euros over the same period.
"Cost synergies are, as expected, materially higher than Barclays have offered, which drives the higher bid price," Collins Stewart analyst Alex Potter wrote in a note to clients.
"This deal offers better value for ABN shareholders and we anticipate the consortium winning control."
The takeover battle shows how European banks are chasing rapid expansion in Europe, the United States, Asia and emerging markets.
"ABN Amro, the banks believe, contains good businesses and customer franchises widely spread across a range of attractive markets," said a joint statement from the consortium issued in Britain and The Netherlands.
"However, ABN AMRO has acknowledged the opportunity for it to deliver benefits for its customers and employees and generate growth and additional value for its shareholders by combining with a partner and selling parts of the ABN Amro group."
The consortium's takeover would "create stronger businesses with enhanced market presence and growth prospects, leading to substantial value creation and benefits for shareholders, customers and employees," the statement added.
Whichever bid succeeds, the deal would be the world's biggest ever bank takeover in financial terms, beating the previous record banking merger when US group Travelers bought Citigroup for 72.56 million dollars in 1998.
RBS will offer 27.2 billion euros (38.3 percent of the combined bid), Fortis 24 billion (33.8 percent) and Santander 19.9 billion (27.9 percent) for ABN Amro.
The new offer was conditional on ABN shareholders rejecting the planned 21-billion-dollar sale of its US unit, LaSalle, to Bank of America.
The RBS-led group had proposed an informal bid last month worth 72.1 billion euros -- but the plans faltered amid uncertainty over the LaSalle sale.
As part of the Barclays takeover, ABN management had agreed to the US subsidiary in a deal viewed by analysts as a "poison pill" to prevent rival bidders.
But the Dutch supreme court has frozen the sale of LaSalle until ABN shareholders can vote on the matter, a decision ABN Amro has appealed.
At the same time, the Bank of America has taken legal action against ABN Amro for breach of contract, with billions of dollars of damages at stake.
Tuesday's consortium takeover bid was pitched at 38.40 euros per share and was 13.7 percent higher than Barclays' agreed offer of 36.25 euros per share.
The consortium offer was 79-percent cash, but the banks added that they would retain one euro per share "pending the resolution of the LaSalle situation."
RBS, Fortis and Santander added that their offer did not include plans for significant offshoring of jobs and that fewer employees are expected to lose their jobs than under Barclays' proposals.
The consortium said Fortis would become a market leader in Benelux following the reorganisation of ABN Amro.
It added that RBS -- which will lead the process -- would become a leading corporate and institutional bank globally and a leading retail and commercial bank in the United States with growth opportunities in Asia.
Santander will become a leading bank in Brazil and establish a retail presence in the Italian market, the consortium added.
As part of the planned reorgansiation of ABN Amro, Fortis will acquire Business Unit Netherlands, Business Unit Private Clients globally and Business Unit Asset Management globally.
RBS will acquire the North America unit, including LaSalle, as well as global clients and wholesale clients in the Netherlands and Latin America, excluding Brazil, Business Unit Asia, excluding Saudi Hollandi, and Business Unit Europe, excluding Antonveneta.
Santander will buy Business Unit Latin America, excluding wholesale clients outside Brazil, Antonveneta, Interbank and DMC Consumer Finance.
ABN Amro has expanded into emerging markets in Asia and has interests in Canada, Italy, Mexico and the United States. It has 4,500 branches in 53 countries.

05/29/2007 12:28 GMT