July 23, 2007 - 9:07
By: TOSTERLING
AMSTERDAM, Netherlands (AP) - British bank Barclays PLC is raising its offer for ABN Amro Holding NV to 67.5 billion euros (US$93.2 billion) with help from two Asian partners, but is still short of a rival bid from a group led by Royal Bank of Scotland PLC.
Barclays' new offer is valued at 42.7 billion euros (US$58.9 billion) in shares and 24.8 billion euros (US$34.2 billion) in cash, or 35.73 euros per ABN Amro share based on Barclays' price Friday.
That compares with its earlier all-share offer valued at 33.86 euros per share, and the RBS-led consortium's bid of 38.40 euros per share, mostly in cash.
Either takeover, if successful, would be the largest in the history of the financial industry.
ABN Amro stated that it "welcomes the opportunity for shareholders to consider two competing proposals on a level playing field."
Barclays shares rose 2.7 per cent in London while RBS stock slipped 0.3 per cent - increasing the value of Barclays' bid and fractionally lowering that of RBS, which is mostly in cash.
ABN Amro shares rose 0.4 per cent in Amsterdam.
"The latest instalment in this major banking tug-of-war has yet again thrown into doubt the identity of the eventual winner," commented Richard Hunter, head of U.K. equities at Hargreaves Lansdown Stockbrokers.
He said RBS still has the advantage due to its higher offer.
But "the most interesting part of its latest move is that it will potentially provide the existing ABN with a foothold in China - and the shareholders will need to take this into account when deciding which offer is best in the interests of the company," Hunter said.
Barclays said it had struck a deal with China Development Bank and Temasek Holdings Ltd. of Singapore, whereby the pair will buy 3.6 billion euros (US$5.0 billion) of new Barclays shares now, and an additional 9.8 billion euros (US$13.5 billion) worth if the bid to buy ABN Amro is successful.
At the same time, the bank plans a 3.6-billion-euro (US$5-billion) share buyback to offset the stock issued to the Asian investors.
Barclays CEO John Varley said the move to join forces with a Chinese partner is smart strategy and makes its offer more attractive to ABN shareholders in the long term than the RBS bid, despite a lower cash value.
"What we offer to ABN Amro shareholders is, in our view, significantly superior to what's being offered by the consortium," Varley said.
He echoed comments by ABN Amro CEO Rijkman Groenink that the Barclays merger was preferable because it sought to combine forces.
"Ours is a build strategy, a growth strategy, it's a strategy led by revenue growth; it's not a strategy led by deconstruction," Varley said.
In the RBS consortium, Fortis NV of Belgium wants ABN's Dutch operations, Banco Santander Central Hispano SA wants its Brazilian and Italian arms, and RBS wants the rest, including ABN's investment banking division.
"I'm still convinced that the merger with Barclays is the best," Groenink said in an interview published over the weekend, but he added that the
"hedge funds and speculators" who likely hold 30 to 40 per cent of ABN's shares "have only one interest and that's in the highest offer, in cash, and today, please."
Many institutional investors also hold ABN Amro shares, and they are legally obliged to choose the highest offer.
ABN Amro's board previously formally endorsed the Barclays offer and amplified that support Monday, stating that the proposed co-operation with China Development Bank "further enhances the growth opportunities of the combined group in the attractive Asian market and can result in creation of additional long-term value for ABN Amro shareholders."
Varley, meanwhile, played down chances that Barclays would raise its offer further.
"Why should we go beyond where we're going today?" he said at a news conference in London. "I think that ABN Amro shareholders will recognize fully the value of what we've put in front of them."
