ABN Drops Support for Barclays Bid
Monday, July 30, 2007; 4:54 PM
AMSTERDAM, Netherlands -- ABN Amro Holding NV dropped its support Monday for a takeover offer by Barclays PLC which is the target of a higher competing bid by a group led by Royal Bank of Scotland PLC.
But the bank's boards said in a statement they could not endorse the RBS bid either because of "significant unresolved questions." The boards said they may yet decide to favor one offer or the other.
The RBS bid, mostly in cash, was worth 70.5 billion euros ($96.6 billion) at Friday's closing share prices, while the Barclays bid, mostly in shares, was worth 63.9 billion euros ($87.5 billion).
Either deal would be the largest in the history of the financial industry.
The decision marks a significant break with the bank's previous policy, which has been to favor the Barclays bid.
ABN also reported net profit for the second quarter of 1.16 billion euros ($1.59 billion), down 4.1 percent from 1.21 billion euros, due to higher taxes and a decline in its mortgage businesses which is being sold in a deal due to close in the third quarter. Operational earnings rose in line with analysts' expectations.
The results did not show an exodus of ABN Amro staff or customers due to the uncertainty surrounding the bank, as some analysts had feared.
The ABN Amro boards praised the Barclays bid as "consistent with ABN Amro's ... strategic vision."
In addition, Barclays' recently announced strategic cooperation with China Development Bank "should further enhance the growth opportunities of a potential combined Barclays/ABN Amro group in the attractive Asian market and could result in creation of additional longer-term value for ABN Amro shareholders."
However, the boards said the financial difference between the two bids was simply too great to ignore.
Chief Executive Rijkman Groenink, who prefers the Barclays bid despite the higher RBS offer, said Barclays shares were trading at an "extremely low" level and he could envision a scenario in which they would rise enough for Barclays bid to pass the RBS-led group bid in value.
That would require an increase of around 18 percent from the 681 pence ($13.78) they closed at on Monday.