RBS group outlines €71.1bn offer for ABN Amro
RBS group outlines €71.1bn offer for ABN Amro
By Norma Cohen
Copyright The Financial Times Limited 2007
Published: May 29 2007 08:03 | Last updated: May 29 2007 11:44
Royal Bank of Scotland and its partners, Fortis and Santander, on Tuesday unveiled their long-awaited formal offer to acquire ABN Amro in a deal that values the Dutch bank at €71.1bn ($95.5bn, £48bn), with 79 per cent of the payment to be in cash.
Peter Thal Larsen, banking editor, on the bid batte for ABN Amro
The consortium said its offer for ABN Amro was at a 13.7 per cent premium to a competing €63bn offer from Barclays Bank that has been accepted by the Dutch bank’s management.
The offer will not be subject to any financing conditions or the disposal of any businesses by the three banks or upon the subsequent sale of any ABN Amro business.
Under terms of the offer, released on Tuesday, each ABN Amro share will be tendered for €30.40 in cash and 0.844 new RBS shares. However, the consideration includes €1 to be retained by the three banks pending the result on a shareholder vote on the sale of ABN’s LaSalle subsidiary in the US, which ABN’s management had agreed to sell to Bank of America.
In a conference call with analysts, Sir Fred Goodwin, group chief executive at RBS, said that the bank expected a return on capital of 13.5 per cent, well above the bank’s own cost of capital.
However, Sir Fred made it clear that the deal remained dependent on reaching some agreement over the future of LaSalle Bank.
“The offer that is on the table today is for LaSalle, full stop,” Sir Fred said in response to a question. The three banks have said they would welcome an agreement with BofA that would allow it to own some of LaSalle.
However, Sir Fred described talks with BofA as “amicable, professional, but not, as we speak, ongoing.”
The banks said that plans for the break-up included retention of the ABN Amro brand name in the Netherlands where Fortis will own its retail and fund management businesses.
The offer document sets out in detail terms of the financing for the acquisition. ABN Amro’s management had questioned the certainty of financing and had also expressed concerns about the risks associated with the carve-up of the Netherlands’ largest bank.
Fortis intends to raise €15bn in new equity financing via a rights issue and up to €5bn in Tier 1 capital and to release up to €8bn in capital through the sale of non-core assets, securitisation and other similar transactions.
RBS will issue new RBS shares worth roughly €15bn and raise roughly €6bn of new, non-dilutive Tier 1 capital. It will finance the remaining cost of its acquisition through internal resources.
Santander intends to raise €9.5bn-€10bn of new equity financing via a rights issue and mandatory convertible instruments equal to about half the value of its offer for the bank. The remainder of its purchase will be financed through what it described as balance sheet optimisation including leverage, incremental securitisation and asset disposals.
The consortium also set out a plan for an orderly business reorganisation, to be led by RBS, which it said will result in stronger businesses overall. RBS will assume responsibility for complying with regulatory requirements.
RBS will become the owner of ABN Amro’s North American businesses, including LaSalle, and wholesale clients in the Netherlands and worldwide. Exceptions are the businesses in Italy and Brazil.
Fortis will assume the Dutch retail businesses, and private client and asset management businesses globally.
Santander will take over the Latin American business, excluding wholesale clients outside Brazil and ABN Amro’s Antonveneta, Interbank and DMC Finance businesses.
The consortium will share head office and central functions, the private equity portfolio and stakes in Capitalia, Saudi Hollandi and Prime Bank.
Several analysts noted that the deal appeared so attractive to the acquiring banks that it may encourage another bidder to emerge.
Mamoun Tazi, analyst at Man Securities, said that ABN Amro shareholders might feel they are leaving too much value on the table at the stated price. “The RBS consortium may fall victim to their own success,” he said.
However, Sir Fred, responding to analysts questions, said the group would not pursue the deal if ABN Amro shareholders demanded too high a price.
“We don’t have to do this deal,” he said. “None of us have to do this. We will not do this deal if it gets to a point where it doesn’t make sense.”
In early trading RBS shares fell 2.2 per cent to 628½p, the biggest fallers among London’s blue-chip stocks. Santander shares put on 0.6 per cent to €13.83, while Fortis slipped 25 cents to €31.06.
ABN Amro shares fell almost 1 per cent to €35.78 while Barclays gained 0.7 per cent to 725p.
By Norma Cohen
Copyright The Financial Times Limited 2007
Published: May 29 2007 08:03 | Last updated: May 29 2007 11:44
Royal Bank of Scotland and its partners, Fortis and Santander, on Tuesday unveiled their long-awaited formal offer to acquire ABN Amro in a deal that values the Dutch bank at €71.1bn ($95.5bn, £48bn), with 79 per cent of the payment to be in cash.
Peter Thal Larsen, banking editor, on the bid batte for ABN Amro
The consortium said its offer for ABN Amro was at a 13.7 per cent premium to a competing €63bn offer from Barclays Bank that has been accepted by the Dutch bank’s management.
The offer will not be subject to any financing conditions or the disposal of any businesses by the three banks or upon the subsequent sale of any ABN Amro business.
Under terms of the offer, released on Tuesday, each ABN Amro share will be tendered for €30.40 in cash and 0.844 new RBS shares. However, the consideration includes €1 to be retained by the three banks pending the result on a shareholder vote on the sale of ABN’s LaSalle subsidiary in the US, which ABN’s management had agreed to sell to Bank of America.
In a conference call with analysts, Sir Fred Goodwin, group chief executive at RBS, said that the bank expected a return on capital of 13.5 per cent, well above the bank’s own cost of capital.
However, Sir Fred made it clear that the deal remained dependent on reaching some agreement over the future of LaSalle Bank.
“The offer that is on the table today is for LaSalle, full stop,” Sir Fred said in response to a question. The three banks have said they would welcome an agreement with BofA that would allow it to own some of LaSalle.
However, Sir Fred described talks with BofA as “amicable, professional, but not, as we speak, ongoing.”
The banks said that plans for the break-up included retention of the ABN Amro brand name in the Netherlands where Fortis will own its retail and fund management businesses.
The offer document sets out in detail terms of the financing for the acquisition. ABN Amro’s management had questioned the certainty of financing and had also expressed concerns about the risks associated with the carve-up of the Netherlands’ largest bank.
Fortis intends to raise €15bn in new equity financing via a rights issue and up to €5bn in Tier 1 capital and to release up to €8bn in capital through the sale of non-core assets, securitisation and other similar transactions.
RBS will issue new RBS shares worth roughly €15bn and raise roughly €6bn of new, non-dilutive Tier 1 capital. It will finance the remaining cost of its acquisition through internal resources.
Santander intends to raise €9.5bn-€10bn of new equity financing via a rights issue and mandatory convertible instruments equal to about half the value of its offer for the bank. The remainder of its purchase will be financed through what it described as balance sheet optimisation including leverage, incremental securitisation and asset disposals.
The consortium also set out a plan for an orderly business reorganisation, to be led by RBS, which it said will result in stronger businesses overall. RBS will assume responsibility for complying with regulatory requirements.
RBS will become the owner of ABN Amro’s North American businesses, including LaSalle, and wholesale clients in the Netherlands and worldwide. Exceptions are the businesses in Italy and Brazil.
Fortis will assume the Dutch retail businesses, and private client and asset management businesses globally.
Santander will take over the Latin American business, excluding wholesale clients outside Brazil and ABN Amro’s Antonveneta, Interbank and DMC Finance businesses.
The consortium will share head office and central functions, the private equity portfolio and stakes in Capitalia, Saudi Hollandi and Prime Bank.
Several analysts noted that the deal appeared so attractive to the acquiring banks that it may encourage another bidder to emerge.
Mamoun Tazi, analyst at Man Securities, said that ABN Amro shareholders might feel they are leaving too much value on the table at the stated price. “The RBS consortium may fall victim to their own success,” he said.
However, Sir Fred, responding to analysts questions, said the group would not pursue the deal if ABN Amro shareholders demanded too high a price.
“We don’t have to do this deal,” he said. “None of us have to do this. We will not do this deal if it gets to a point where it doesn’t make sense.”
In early trading RBS shares fell 2.2 per cent to 628½p, the biggest fallers among London’s blue-chip stocks. Santander shares put on 0.6 per cent to €13.83, while Fortis slipped 25 cents to €31.06.
ABN Amro shares fell almost 1 per cent to €35.78 while Barclays gained 0.7 per cent to 725p.
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