A trio of banks led by Royal Bank of Scotland has proposed a 72 billion euro ($98 billion) bid for Dutch bank ABN AMRO, threatening to thwart an agreed takeover by British rival Barclays.
The RBS group, which also includes Spain's Santander and Dutch-Belgian bank Fortis, said on Wednesday it planned to offer 39 euros a share for ABN, provided the Dutch bank scraps its planned $21 billion sale of U.S. unit LaSalle Bank to Bank of America.
The offer, 70% in cash and 30% in RBS shares, would beat the all-share bid announced on Monday by Barclays -- worth around 65 billion euros or 35 euros per share at Wednesday's close -- and could trigger the biggest-ever bank takeover battle.
But the consortium, due to talk to ABN via a conference call later on Wednesday, will first have to unpick the LaSalle deal.
LaSalle is ABN's most attractive asset for RBS, which already has the biggest U.S. presence of any overseas bank. The swift sale of the bank -- announced on Monday after only four days of due diligence and with a $200 million break fee -- was widely seen as an effort by ABN and Barclays to put off rivals.
A bid by RBS and its partners would result in a full break up of ABN, an option ABN's management has shunned -- even though sources familiar with the matter say the RBS deal would involve fewer job losses than under Barclays, which would cut 23,600.
"If this was a fair fight and there wasn't this poison pill, this would be an open and shut case as of this morning," analyst Alex Potter at Collins Stewart said. "However, dealing with the way the LaSalle sale has been constructed it's all about whether there is some way of that being withdrawn."
Clock Ticks for Suitors
ABN Chief Executive Rijkman Groenink, in comments made available to Reuters, said the bank would talk to the RBS consortium, but added the only way to acquire all of ABN would be to bid for LaSalle and for the group -- separately.
"Anyone can still bid for LaSalle and for the rest of the group so they are still able to acquire the whole of ABN AMRO.
It only has to be done with two bids instead of one," Groenink said. "Everyone should realize this is actually a very good structure for shareholders as it maximizes the price for LaSalle as well as for the rest of the group."
Sources familiar with the matter have said ABN, under pressure from shareholders, may request more information from the three suitors, including on financing, before allowing them due diligence, which RBS has indicated could be done in days.
Wednesday's fresh RBS approach comes on the eve of ABN's key shareholder meeting when shareholders are set to vote on a break-up proposal tabled by activist hedge fund TCI, and on the day of the Scottish bank's own annual meeting.
In a show of unity the CEOs of RBS, Santander and Fortis spoke together in Edinburgh, saying they would prefer not to mount a hostile counterbid for the Dutch bank.
"It's our preference and remains our preference to try and find an agreed, constructive way through all of this. We would hope that working with ABN we'll be able to do that," RBS CEO Fred Goodwin told reporters.
He said the consortium was confident of backing from its own shareholders should the three banks go ahead with a firm offer.
RBS said it would "act prudently but with great determination."
Financing the deal could involve a massive share issue for both Fortis and Santander to meet the offer's cash component.
Not Over Yet?
RBS is no stranger to tricky deals, having bought NatWest -- twice its size -- in 2000, but taking over ABN would also involve a complex and unprecedented carve-up.
Under the plan, Santander is expected to get ABN's Brazilian and Italian assets, with RBS taking the wholesale bank, LaSalle and Asian businesses. Fortis would take the Netherlands.
RBS excluded approaching ABN for just LaSalle -- it would have until midnight on May 6 to try and outbid BoA according to the sale deal -- saying it would stick by its partners.
RBS shares closed 0.75% lower, partly on concern it could have to raise fresh equity -- a prospect sources close to the matter have dismissed, however. Fortis shares were down 1.7%, with Santander stock up 0.15%.
ABN AMRO shares jumped more than 5% to as high as 37.2 euros on news of the proposal and ended at 36.2 euros -- still well below the potential value of an RBS offer. Barclays shares closed up 1.6% at 724 pence.
Analysts said they did not expect a price war for ABN, with Barclays unlikely to raise its offer again -- even if the RBS group can unpick the LaSalle deal.
"(Monday's) deal was already pretty stretched for Barclays," analyst Antony Broadbent at Sanford Bernstein said. "They've played their hand well, but it was a weak hand to start with."
ABN AMRO has for months been under pressure from investors such as TCI, with just under 3%, to consider a sale following years of underperformance. TCI said ABN must recommend the consortium's proposal and terminate the LaSalle sale.
The bank also faces the prospect of messy legal action which could slow any eventual takeover. Investors including shareholder group VEB threaten to sue over the LaSalle sale, which they say has unfairly hindered rival suitors.
Bank of America, meanwhile, could sue ABN if the LaSalle deal falls through. The bank said on Wednesday it had a legal contract to acquire LaSalle and expected that to be fulfilled.