Barclays still confident despite RBS sweetener

Jul 18 2007 by Tony McDonough, Liverpool Daily Post

BARCLAYS yesterday remained bullish about its chances of winning the battle for control of Dutch Bank ABN Amro, despite a revised bid this week from the rival Royal Bank of Scotland-led consortium.

On Monday, RBS turned up the heat on Barclays after sweetening the terms of its £48.2bn offer for ABN.

RBS, along with consortium partners, Spain’s Santander and Belgium-Dutch group Fortis, said it would now pay 93% of the consideration in cash, in an attempt to trump Barclays’s agreed £45bn merger deal.

The increase in the cash element – up from 79% – means the consortium will pay £44.7bn in cash, with the remaining payable in RBS shares.

But yesterday Frits Seegers, Barclays chief executive, Global Retail and Commercial Banking, said the group remained confident of seeing off its rival.

He added: “We are confident the deal will succeed because it is based on growth.”

Mr Seegers declined to comment on a revised bid from RBS.

Barclays could be looking at tactics such as issuing convertible bonds, or using the 12bn euros in cash from the sale of LaSalle that it had previously earmarked for a share buyback, the Financial Times said, without citing sources.

Should Barclays win the battle, it has said more than 20,000 jobs could go from the worldwide operations of the combined business. Its Barclaycard division employs around 800 people in Liverpool, although it is believed most of the losses would come from the ABN side of the business.

The revised offer from the RBS consortium follows a Dutch court ruling last week to allow the sale of ABN’s Chicago-based LaSalle banking operations to Bank of America to go ahead without shareholder approval.

RBS’s initial bid was conditional on the inclusion of the business, but chief executive Sir Fred Goodwin said the group had not considered pulling out following the court’s decision.

Analysts widely expect Barclays to come back with a renewed offer proposal for the Amsterdam-based bank.

It is thought that Barclays could stump up an extra £2.7bn from the potential cost savings following a merger.

Opinion appears to be split over who has the most to lose as the price for ABN rises.

Bear Stearns warned the revised offer from RBS may be a knockout blow to Barclays’ chance of winning ABN due to the cash component of the new offer.

It believes Barclays should walk away.

At the same time, Howard Wheeldon, senior strategist at BGC Partners, said the RBS offer proposal looks “an expensively- priced bid” which risked incurring shareholder “wrath”.

He said he believed Sir Fred should walk away from the bid battle, adding he saw “Barclays as the most likely winner of this now long-running, and potentially damaging, banking acquisition contest”. Barclays chief executive John Varley said on Monday: “We are very clear that we will only proceed with this transaction on terms which produce the right results for our shareholders.

“We have high benchmarks for returns and we will not compromise them.”

ABN Amro has backed the Barclays offer as it is reported to be keen to keep the banking operations together under a merger to create the world’s fifth largest bank, rather than see a “dismantling” of the business proposed by the RBS consortium.

ABN said yesterday it was studying the consortium’s bid proposal.

Barclays and the RBS-led group have until July 23 to table formal offers for ABN.

tonymcdonough@dailypost.co.uk