‘Barclays initiates takeover of ABN’
August 7, 2007 at 11:36 am
Despite fierce competition from a rival consortium led by the Royal Bank of Scotland, Barclays today showed it has no intention of letting up in the struggle for ABN Amro by officially launching a 65 billion euro takeover bid.
The move comes after the Dutch bank removed its formal support for Barclays’ higher 67.5 billion euro bid and the aforementioned RBS consortium proposed its own 71.1 billion euro offer in May. Indeed, Barclays’ formal bid is just the latest development in what has proved a protracted struggle over ABN Amro’s future which reached the public eye in late March. The success of Barclays’ proposal still hangs in the balance. The bank itself has refused to back either Barclays or RBS officially, and there is still much to recommend the RBS-led bid, which includes partners Banco Santander of Spain and Fortis of Belgium. The cash part of their own 71.1 billion euro deal was recently raised from 79% to 93% as a way of winning over shareholders, in contrast to Barclays’ previous bids which valued ABN lower and were composed mainly of shares rather than cash.
Nevertheless, Barclays appears confident that it will prevail with its own record-breaking bid. Barclays Chief Executive John Varley was confident, but acknowledged other key factors, stating, “Am I confident about our ability to win the ABN AMRO merger? Yes I am, but I recognize there is a significant dependency on where our stock is trading at the relevant time”. The focus on Barclays’ stock is understandable considering the nature of its offer and, with ABN shareholders only voting on the takeover two months from now, the Dutch bank’s future is still very much in the air. Barclays argues it has guarded against any potential collapse in stock by instigating a £2.4 billion share buyback program, claiming this will boost share prices.
Moreover, according to Barclays, the disparity in the cash offer of RBS and its own largely shares-based offer is purely superficial. With Barclays’ offer, ABN investors will be given 13.15 euros in cash as well as 2.13 Barclays shares for every ABN share. This will swing the matter in Barclays’ favour in the opinion of Barclays’ president Bob Diamond, who commented, “there are a lot of investors who want shares… I think and I expect they will see the opportunity with Barclays to be far superior in terms of forward-looking earnings and unlocking value”.
Diamond’s views were partly justified by Barclays Bank posting strong half-year profits on 2nd August. Pre-tax profits rose 12% to £4.1 billion despite the bank refunding approximately £87 million in settlement payments to customers who argued they had been overcharged for overdraft fees. However, despite the healthy state of Barclays and the persuasive arguments in favour of its bid, with the offer period running from 7th August to 4th October, the light at the end of the tunnel for either Barclays or RBS is still a long way off.
