The battle for ABN Amro is edging ever closer to an end-game. And a tentative consensus is forming.
Barclays, says London brokerage Execution, just cannot win. The consortium led by RBS responded strongly to the Dutch Supreme Court’s decision to allow the sale of LaSalle, maintaining its offer at €38.4 a share, and raising the cash element to 93 per cent. Barclays has yet to react. Execution’s research team has carried out a survey of institutional shareholders and they suggest:
There exists no bid level by which Barclays can win over its own shareholders and convince ABN shareholders to accept their offer over that of the Consortium.
If Barclays raised their offer, worth about €35, to €38 a share, 86 per cent of ABN shareholders would still select the RBS group’s offer, while even at the current offer level, only 41 per cent of Barclays shareholders support the bid.
The responses from 55 institutions suggest that Barclays would need to up its offer to at least €40 a share to have a chance of getting approval from the ABN shareholders - assuming RBS et al stick where they are.
Barclays needs cash to win over the sceptical ABN shareholder base. Without a cash component, just 5 per cent of ABN shareholders would choose a Barclays offer, even if raised to €38 or even €40 a share. Making up to half of its offer in cash would make little difference to its chances of success, Execution adds.
The survey suggests that Barclays will need to reduce the paper component of its bid to less than a quarter in order to get ABN shareholders on side. And that, they say, is not viable for the UK bank.
So good news for RBS then? Not so fast, says RJH Adams at the Capital Chronicle blog. With a backdrop of rising interest rates, RBS is trading on a earnings multiple of less than 10 and dropping to under 8 on forecasts. Yet it is still willing to pay 20 times for the “distinctly ordinary” ABN Amro franchise - and without the domestic overlap provided by the Natwest buy in 2000.
In fact, says Adams, Fortis, which is pursing a transformational deal with scope for job destruction across the Dutch network, and Santander, which is in for Brazil, look better positioned than the group’s leader.
It is curious, given their relative strengths in Brazil, that Barclays has not tried a divide and rule tactic to break the opposition by conceding a sale and dealing directly with the Spanish.
Meanwhile, he says, there are whispers of a rival bid in the offing from Citigroup, Banco Bilbao and ING - although who would be advising a competing grouping given the banks already tied up in this bunfight is anyone’s guess.
Whoever walks away from ABN empty handed, they need not be lonesome for long though. Analysts Europe-over will be lining up to play match-maker for their next M&A outing.
First up, with almost indecent haste, is Millan Gudka, from Dresdner Kleinwort. Tipping SocGen to be involved in a “mega-merger” within 12 months, Gudka suggests that Barclays provides ” another strong merger option for SocGen, if, as [DK] think will happen, the British-based bank fails in its bid attempt for ABN.”
