Atticus Urges Barclays to Drop ABN Amro Bid

U.S. hedge fund Atticus Capital is urging Barclays to drop its 65 billion-euro ($87 billion) bid for Dutch bank ABN Amro after buying a significant stake in the British bank.

Atticus said in a letter to Marcus Agius, Barclays chairman, that it was concerned the bank will be issuing shares to buy "an inferior business, in an auction at inflated prices."

The letter was published by the Financial Times and verified by a source familiar with the matter. The source said Atticus held an interest in Barclays of about 1%.

Barclays said on Monday Atticus's views were not representative of feedback from its investors.

But its shares jumped over 3% on the prospect of investor opposition, which could make it harder for the bank to win its battle for control of ABN .

Sprawling Assets

The letter said Barclays would be issuing stock at nine times earnings and paying more than 15 times earnings for ABN.

"It is clear that you are not the best owner for ABN Amro's sprawling collection of assets," the letter said, adding that a rival consortium led by Royal Bank of Scotland offered "significantly higher synergies" and was positioned to outbid Barclays.

Atticus said it was concerned that Barclays would raise its offer and said it would vote against the deal and encourage others to do likewise.

"The views expressed by Atticus Capital are not representative of the feedback we have received by shareholders, who remain supportive of our strategy," a Barclays spokesman said in a statement.

He said the bank encouraged shareholders who opposed the offer to "engage in a dialogue with us" and reiterated the bank's view that the deal offers value for investors and meets its financial criteria.

Senior Barclays management have been on a roadshow and met over 100 investors, including Atticus, in recent weeks, a source familiar with the matter said.

Rival Consortium

Barclays agreed to an all-share takeover of ABN in late April but the rival RBS consortium has offer 71 billion euros for ABN, mostly in cash.

That is conditional on also buying ABN's U.S. arm LaSalle Bank, which ABN has agreed to sell to Bank of America. A Dutch court has frozen that deal.

Atticus became involved in a previous big European financial deal, when it bought a 10 percent stake in European exchange Euronext and backed its $14 billion merger with NYSE Group.

In contrast, it took a big stake in U.S. miner Phelps Dodge last year and helped derail plans to buy two Canadian miners and supported a takeover of Phelps Dodge itself instead.

Several analysts said the letter is unlikely to derail Barclays' proposal, but may tap into a general concern against a higher bid.

Barclays is unlikely to sweeten its offer until there is greater legal clarity next month on the sale of LaSalle, but several analysts said it could add some cash to its bid.

Barclay's shares were up 1.45% at 733 pence, after hitting 755p. ABN shares were down 0.1% at 35.2 euros while RBS shares were up 0.4%.