Barclays, ABN Shares Up as Talks Advance; Asset Sales Possible
Shares in Barclays
Barclays' chances of landing ABN for the world's biggest bank acquisition also improved after the two sides outlined a framework proposal late on Tuesday, analysts said.
The UK bank is expected to recoup some of its outlay by selling some ABN businesses. This could include U.S. retail bank LaSalle, but is more likely to include stakes in Saudi Arabia and parts of wholesale and investment banking, analysts said.
Barclays and ABN said a combined company would be listed in London, headquartered in Amsterdam and have its two top jobs split.
"Clearly the key issue of price remains unsettled, but we believe this announcement was made to emphasize that talks are serious and put a couple of soft issue hurdles in the way of potential counter-bidders," analysts at Keefe, Bruyette & Woods said in a research note.
In London, Barclays shares were up 1.9% at 715-1/2 pence, valuing it at 45 billion pounds ($88.1 billion). ABN shares were up 0.3% at 31.1 euros, valuing it at over 59 billion euros ($78.4 billion). ABN stock also was higher in trading on the New York Stock Exchange.
Dealers said Barclays may be offering more concessions to ABN than expected to smooth the path to a deal and so reduce the need for it to pay a lofty premium.
Barclays is in exclusive talks to buy ABN and is likely to pay about 33 euros per share, mostly in shares but possibly including a cash sweetener, analysts said.
It may deliver cash to shareholders from the sale of some units, and reports on Wednesday said it was considering a sale of LaSalle, which could fetch up to $23 billion.
A source familiar with the matter added that the talks are still at such an early stage that nothing has yet been ruled out including such asset sales.
"They would desire to hold on to all of it if they could, but people may be expecting them to do one or two side deals to get some higher value for some of these assets," said Steve Hayne, analyst at Fox-Pitt Kelton.
"This is a complex deal with operations all over the world, so at some point they run out of resources to properly and quickly integrate. So if they can reduce that complexity a little bit and enhance value through onselling then it could be in their interests," he added.
Nick Hill, credit analyst at Standard & Poor's concurred. "It may be tempting to sell even if it makes more sense to keep something for long term strategy," he said, adding ABN's Brazilian and Asian business are likely to be kept and Barclays may channel its U.S. attention on its investment bank.
But others said a sale of LaSalle would go against the logic of building a global bank.
"I would regard one of the commercial logics of Barclays bidding for ABN as the opportunity to pick up a U.S. regional business on the cheap," said one analyst, who asked not to be named. "If all Barclays was going to do was to come in and carve up the business, ABN can do that themselves."
A more likely option could be the sale of ABN's 9 percent stake in Italian bank Capitalia
ABN also owns a 40% stake in the Saudi Hollandi Bank, which is worth about $1.7 billion and has already attracted interest, sources have said in the past.
Barclays said its talks with ABN were at an early stage and asset sale talk was speculative.