Barclays Lifts ABN Offer with China, Singapore Help
British bank Barclays has raised its bid for Dutch group ABN Amro to 67.5 billion euros ($93 billion), helped by some of the biggest ever overseas investments made by China and Singapore.
Barclays said on Monday its new bid was 42.7 billion euros in shares and 24.8 billion euros in cash, up from its previous all-stock offer of 65 billion euros but still below a rival 71 billion euro offer from a group of European banks led by Royal Bank of Scotland.
Either offer would be the biggest ever bank takeover.
ABN had agreed to Barclays' original takeover, but its management has come under pressure to switch support and said on Monday it was now assessing the offers.
"I hope and expect we will have that recommendation but for the time being there will be no recommendation until they see how the stock price performs," Barclays Chief Executive John Varley told Reuters, adding its offer was conditional on getting such a recommendation.
Barclays shares rose 2.4% to 731 pence in early trading -- lifting the value of its offer to 69 billion euros -- aided by the investment of up to 13.4 billion euros by China Development Bank and Singapore state investor Temasek.
An initial investment from the pair of 3.6 billion euros will be used by Barclays to buy back shares during the takeover process, which analysts said would lend support.
"This finally explains why Barclays management have been so confident for so long, despite having a seemingly inferior offer on the table," said Pali International analyst Bruce Packard.
The remainder of the investment from China and Singapore, almost 10 billion euros, will be made if Barclays wins ABN.
Biggest China Investment
China Development Bank will take a 3.1% stake in Barclays, potentially rising to 8% of an enlarged Barclays, while Temasek will take a 2.1% stake in Barclays, potentially rising to just over 3%.
Varley said China Development Bank's stake would be the biggest overseas investment by China and he was "entirely comfortable" with it becoming its biggest shareholder.
"I think it will be regarded as a very significant event in global markets, it's by far the biggest external investment ever made by China," Varley said.
China Development Bank is one of the country's three lenders driven by a strategy to support government policy.
Flush with $1.33 trillion in foreign exchange reserves, China has made no secret of its intention to diversify its portfolio of foreign holdings, which is now concentrated in government assets, and is expected to be an increasingly active source of global funding.
Barclays is the latest in a string of bets on financial companies by Temasek. About a third of its $85 billion portfolio is made up of financial services firms and last year it bought an 11.6% stake in U.K.-based Standard Chartered.
ABN said it would examine both offers in "a fair and transparent manner," but welcomed the strategic investment in Barclays from China and Singapore.
Barclays President Bob Diamond said he was optimistic ABN shareholders will back his bank's offer when they vote in late August or September. "This isn't a bust up strategy ... if you look at the further opportunities the announcements today have on the share price and on the opportunity to look at profit potential down the road, it's quite substantive."
"There are a lot of shareholders who would like to have the equity of the combined business going forward," Diamond said.
Barclays also said its earnings per share in the six months to the end of June rose 14% from a year ago to 41.4 pence and its pretax profit rose 12% to 4.1 billion pounds.
ABN shares were up 0.6% at 36.83 euros.
Shares in the three consortium members -- RBS, Belgian-Dutch group Fortis and Spain's Santander -- were little changed.