ABN, Barclays in exclusive $160 billion merger talks

WHITE KNIGHTS

Analysts at Keefe, Bruyette & Woods said an approach by Barclays was realistic and it could offer 31.3 euros per ABN share, or more if it sold off units that did not fit its plans.

Dutch shareholders group VEB said that ABN AMRO could be bought for 32.70 euros per share, according to a poll of 14 analysts it conducted on Monday.

Regulatory problems are unlikely, analysts said.

ING, which controls 5.5 percent of ABN's voting rights, said it does not feel pressured to do large takeovers but it wanted to participate when there is European banking consolidation. It declined to comment on ABN.

TCI stirred speculation about ABN's future when it said in February the bank was significantly undervalued and called on it to merge, sell or spin off some of its assets or potentially the whole business. Other investors have also called for change.

Until its annual general meeting next month, ABN plans to run a dual-track process which will see it continue to pursue cost cuts and the sale of stakes and non-core assets before deciding which route to pursue, the source familiar with the matter said.

Barclays has made no secret of its plans to expand overseas and CEO Varley said last month acquisitions were an option.

A combined Barclays-ABN would rank as the world's fifth biggest bank, but although analysts said there were strong merits to such a tie-up, so would a deal between ABN and many of the big European banks.

In addition to its strong retail presence in several countries, ABN's retail-focused fund management arm could fit well with Barclays Global Investors, which mainly has institutional clients.

It is less clear how ABN's investment bank business, which includes UK corporate broker Hoare Govett and an M&A advisory business, would fit with Barclays Capital, which has built a strong position in debt capital markets.

Barclays Capital has not ruled out offering M&A advisory services, and the head of the unit, Bob Diamond, may relish the chance to turn around ABN's division. However, it could distract his fast-growing business from its core debt market strength, analysts said.

Analysts said any offer could involve a cash sweetener, but would be largely share based. However, Barclays shares have dropped 16 percent since hitting a record high of 794-1/2p three weeks ago, while ABN's shares have jumped 15 percent in the last month.

Barclays trades on about 9.6 times forecast 2007 earnings, compared with over 11 times for ABN, according to Reuters data.