Barclays Could Sweeten Offer for ABN Amro: Source
Barclays has not ruled out adding cash to the terms its ABN Amro offer should it need to boost its bid to fight off a rival offer from a consortium of banks led by Royal Bank of Scotland, a source familiar with the matter said on Wednesday.
The Financial Times had earlier said that Barclays recognized that unless legal disputes ran in its favor it needed to improve its 65 billion-euro ($86.74 billion) offer if it was to have a chance of beating a consortium led by Royal Bank of Scotland.
The source, however, said the market could yet change and the price of Barclays share rise in coming months, reducing the necessity for the bank to change the terms of its offer should RBS go ahead with its bid.
Barclays is considering reducing the number of shares it would issue for ABN Amro and replacing them with cash, the source said.
The bank is, however, unlikely to make a decision about restructuring its offer until it becomes clear whether the RBS group can go ahead with its 71.4 billion euro break-up bid for ABN, the source added.
Reuters had already reported at the end of May that Barclays had scope to sweeten its offer and add some cash to its all-share offer but was unlikely to rush into making a response to the possible offer by the RBS-led consortium.
That offer depends on the group, which also includes Santander and Fortis, resolving a dispute with Bank of Americaover the ownership of LaSalle, ABN's U.S. bank.A spokesman for Barclays declined to comment on the matter.
Sweetened Bid Prospect
The prospect of Barclays sweetening its bid could upset big investors who are worried about a bidding war between Barclays and Royal Bank of Scotland. But the FT said Barclays believed it could improve its offer without relaxing its strict criteria for acquisitions.
The FT report said Barclays could raise cash by raiding the reserves it is required to hold, reducing the combined group's capital ratio from 5.75% to about 5% while scaling back the number of shares it issues to ABN shareholders.
Another option is for Barclays to use the cash ABN is expected to receive from the sale of LaSalle.
Barclays had agreed to return 12 billion euros from the sale of LaSalle to shareholders of the combined bank through a share buyback.
Barclays could pay some or all of this cash, which the FT said was equivalent to about 18% of the bid value, to ABN shareholders by including it in the offer.
The news comes as Santander said it will sell Spanish property assets for 4 billion euros ($5.3 billion) to help fund its participation in the rival bid for ABN Amro.
The Dutch Supreme Court is expected to rule by mid-July on whether ABN shareholders can block the LaSalle sale to Bank of America and thereby open up the prospect of a higher offer for the group.