British bank Barclays has raise its offer for ABN Amro Holding to 67.5 billion euros (US$93.1 billion) with help from two Asian partners, an attempt to remain competitive with a rival bid from a group led by Royal Bank of Scotland.
Barclays' new offer, about two-thirds in shares and the rest in cash, comes to 36.47 euro per ABN Amro share -- up from its earlier all-share bid worth 34.30 euro but still below the RBS-led consortium offer of 38.31 euro per share that values ABN at 72.4 billion euro (US$97.8 billion).
Either takeover would be the largest in the history of the financial industry.
ABN Amro said it a statement that it had received Barclays' revised offer and "welcomes the opportunity for shareholders to consider two competing proposals on a level playing field."
ABN had endorsed the earlier Barclays bid, and sold its U.S. arm LaSalle Bank to Bank of America for $21 billion in what was seen as a poison pill measure to frustrate RBS, which also wanted LaSalle.
ABN shareholders objected, but the Dutch Supreme Court approved the sale last week and it is expected to close before the end of the year.
Barclays shares rose 3% to 735 pence Monday, while RBS shares fell 0.1% to 610 pence -- increasing the value of Barclays' bid slightly and fractionally lowering that of RBS, which is more than 90% in cash.
ABN Amro shares rose 0.7% to 36.90 euros, between the two offers.
"The latest installment in this major banking tug-of-war has yet again thrown into doubt the identity of the eventual winner," said Richard Hunter, head of U.K. equities at Hargreaves Lansdown Stockbrokers. He said RBS still has the advantage due to its higher offer.
But "the most interesting part of its latest move is that it will potentially provide the existing ABN with a foothold in China -- and the shareholders will need to take this into account when deciding which offer is best in the interests of the company," he said.
Barclays said it had struck a deal with China Development Bank and Temasek Holdings of Singapore, whereby the pair will buy 3.6 billion of new Barclays shares now, and an additional 9.8 billion shares if the ABN Amro bid is successful.
At the same time, the bank said it planned a 3.6 billion stock buyback to match the amount of its shares issued to the Asian investors.
If the deal goes through and CDB takes up its full share of 9.8 billion, the Chinese government would have a 7.7% stake in Barclays-ABN, though China says it plans to turn CDB into a private commercial bank. Both CDB and Temasek would gain seats on Barclays' board.
Barclays CEO John Varley said joining forces with a Chinese partner was smart strategy in any case, but the main aim was to make its offer more attractive to ABN shareholders than RBS' in the long term, despite a lower cash value.
"What we offer to ABN Amro shareholders is, in our view, significantly superior to what's being offered by the consortium," Varley said.
He echoed comments by ABN Amro Chief Executive Rijkman Groenink that the Barclays merger was preferable because it sought to combine forces. "Ours is a build strategy, a growth strategy, it's a strategy led by revenue growth, it's not a strategy led by deconstruction," Varley said.
Among the consortium, Fortis of Belgium wants ABN's Dutch operations, Banco Santander wants its Brazilian and Italian arms, and RBS wants the rest, including ABN's investment banking arm.
"I'm still convinced that the merger with Barclays is the best," Groenink told Dutch newspaper NRC Handelsblad in an interview over the weekend, though he added that he thought RBS would win the bidding.
The Barclays offer "is better in terms of its content, but it's not good enough in terms of amount," he said. "Hedge funds and speculators" likely hold 30% to 40% of ABN's shares, he said. "They have only one interest and that's in the highest offer, in cash, and today, please."
Varley played down chances that Barclays would raise its offer further. "Why should we go beyond where we're going today?" he said. "I think that ABN Amro shareholders will recognize fully the value of what we've put in front of them."
Collins Stewart analyst Alex Potter said his group believed the RBS-led bid has greater industrial logic and is more valuable. "We still believe RBS will win ABN Amro -- just."
The RBS offer period began Monday and expires Oct. 5. Barclays is to issue its formal offer by Aug. 6, with expiration in late September. ABN shareholders will likely meet in early September to discuss the bids.
Barclays is to report first-half earnings on Aug. 2, but issued an unaudited trading update Monday. It said "income net of insurance claims" in the six months through June 30 rose 9% to 11.9 billion pounds (US$24.4 billion) and pretax profit increased 11% to 4.1 billion pounds.