Geoff Cutmore - Morning Thoughts

Going Dutch: Don’t Expect a Quick Solution

Chests are being bared, knuckles cracked and muscles flexed. What we have here is the making of a good old fashioned punch up. In the red corner, Barclay’s bank and Bank of America, and in the blue corner, the challengers: RBS, Santander and Fortis. Although the prize, ABN Amro, ought to be neutral-- to maximize shareholder returns -- management has given the nod to Barclays.

The news today is of a list of questions, 25 in fact, apparently winging its way to RBS chief Fred Goodwin, seeking more detail about how the consortium’s $100 million bid would be financed. ABN has opened its books and feels it should get something in return.

The waters have been well and truly muddied, as well as the banks involved. Shareholder group VEB and hedge fund TCI are parties to this complex of legal, regulatory and banking testosterone. The UK’s Telegraph newspaper noted the hiring of superstar U.S. lawyer Robert Fiske as a sign Bank of America is gearing up for a legal fight if ABN Amro reneges on its promise to sell its U.S. operation LaSalle.

This all makes great copy and we are all enjoying the twists and turns in the story. If you own ABN Amro stock, sit tight and enjoy the ride. And some ride it could be, Peter Lenardos, director of European research at Churchill Capital, thinks there won’t be a clear winner until 2008.  Prolonged takeover battles are usually good news for shareholders in the target. Time to put the champagne on ice -- just don’t anticipate opening it too soon.

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