ABN Suitors Face Tricky Deal, Earnings Up

Dutch bank ABN AMRO does not plan to open its books to a trio of its European rivals who may gate-crash ABN's $85-billion-plus takeover talks with Barclays, and the consortium's interest could speed up Barclays' courtship process.

A source familiar with the situation said Barclays may update investors on progress this week, possibly by Wednesday, which is an informal deadline for its
exclusive talks with ABN .

The Financial Times reported that the two banks had given themselves until Wednesday to agree the merger.

ABN is concerned about the lack of details from the rival consortium led by Royal Bank of Scotland, as well as the risk of failure of a complex bid, other sources familiar with the situation said late on Sunday.

RBS, Dutch-Belgian group Fortis and Spain's Santander said late on Friday they had invited ABN to the negotiating table and asked for access to its management and books -- just days before ABN's exclusive talks with Barclays were due to end.

The trio hope to strike a friendly deal with ABN's board, but may consider a "more aggressive approach," a source close to the matter said at the weekend.

The sources, who said ABN will not yet open its books, said it wants at least to see an indicative price and a structure for an offer before entering into talks with the new group.


Any offer from the RBS-led consortium could be partly made up of shares and may lead to ABN shareholders ending up with stock from three different banks.

But a source close to the situation said on Saturday they may offer shares in all three banks, or shares in two of the banks plus cash, depending on whether ABN's board would enter talks.

With the three banks able to extract greater synergies from a deal than Barclays, they could offer up to 40 euros per ABN share, more than the British bank is likely to offer, analysts said recently.

That expectation is likely to send ABN shares to near 35 euros from Friday's closing price of 33.65. European markets had closed when RBS and its partners confirmed their interest, but ABN's U.S.-listed shares reacted with a 5.4% rally.

Any deal by the consortium is likely to be complex and may result in more job cuts than under a Barclays approach, and so not win the backing of ABN's management.

RBS is likely to take ABN's U.S. bank Lasalle and a large part of its wholesale banking operations, sources close to the situation said. Sources said the Edinburgh-based lender was unlikely to tap shareholders to fund its part of a deal.

Santander would buy ABN's Brazilian banking arm and is the most likely to take its Italian assets, while Fortis would take on the Dutch retail banking and asset management operations, the sources said.

But to get the prize, the trio will need to unseat the first comer, Barclays, for the prize of the biggest-ever bank takeover.

Investors will focus on an unscheduled trading statement from ABN, which would say the bank's performance was better than expected in the first three months of the year, Britain's Daily Telegraph newspaper reported, without citing sources.

Barclays began exclusive talks with ABN on March 19, with a flexible 30-day period set. Even if the two banks have not agreed to a deal by then, the approach by the RBS-led consortium will put pressure on them to issue an update on the talks.

Double-digit Earnings Rise

In addition, ABN reported double-digit earnings gains. The Netherlands' biggest bank said its net profit rose 30.6% to 1.31 billion euros ($1.77 billion) in the first quarter from a year earlier. Earnings per share from continued operations rose 30% to 0.65 euro from 0.50 euros, the bank said.

ABN AMRO said it issued the summary of results ahead of its scheduled April 26 earnings announcement "in light of recent developments and in order to be fully transparent."

In Monday's statement, Rijkman Groenink, managing board chairman at ABN, said that ABN was on its way to reaching its goal of earnings per share of 2.30 euros in 2007.