Monday, July 30, 2007 U.K. U.K.: "ABN Amro Drops Support for Barclays's Takeover Offer"

ABN Amro Holding NV, the target in the world's biggest banking takeover battle, withdrew its support for Barclays Plc's offer because of a higher bid from a group led by Royal Bank of Scotland Group Plc.
While the Barclays offer matches ABN Amro's ``strategic vision,'' the board can't recommend it from ``a financial point of view,'' the Amsterdam-based company said today. The 72 billion- euro ($98.3 billion) bid from Royal Bank, Fortis and Banco Santander SA is 9.8 percent higher than Barclays's offer.
ABN Amro had backed Barclays since April, in part because the London-based bank plans to keep the biggest Dutch lender intact. ABN Amro declined to recommend the bid from the trio led by Royal Bank, citing ``unresolved questions'' about the group's proposed breakup of the 183-year-old company.
``The Barclays offer is dead,'' said Gary Clarke, a fund manager who helps oversee about $260 billion at Schroders Plc in London, including shares of ABN Amro and Barclays. Only an objection by the Dutch regulator or a decision by Royal Bank or Fortis shareholders to reject financing for the deal could revive Barclays's chances, he said.
The Dutch bank reported a 7.1 percent decline in second- quarter profit to 1.13 billion euros, matching analysts' estimates, after year-ago earnings were boosted by the sale of a stake in a Hungarian lender. ABN Amro said results at Banca Antonveneta SpA in Italy were ``below expectations.''
ABN Amro shares rose 28 cents, or 0.8 percent, to 35.18 euros by 4 p.m., bringing gains this year to 44 percent. The stock is the best performer on the 65-member Bloomberg Europe Banks and Financial Services Index. Barclays fell 0.4 percent in London, while Royal Bank rose 0.4 percent.
Sweetened Offers
Barclays Chief Executive Officer John Varley, in a statement today, said the bank recognizes that it's ``difficult for the boards of ABN Amro to make a clear recommendation.'' He said Barclays remains confident its offer ``delivers the value, stakeholder benefits and certainty that will allow the boards to support a recommendation in due course.''
Barclays sweetened its offer on July 23 to include 37 percent cash after lining up as much as $13.5 billion of investments from China Development Bank and Singapore's Temasek Holdings Pte.
The bid from Royal Bank, Santander and Fortis, which is 93 percent cash, started last week and runs through Oct. 5. ``We note ABN Amro's announcement and hope it leads to further cooperation,'' Royal Bank said in e-mailed statement today.
The acquisition of ABN Amro would be the largest financial- services takeover, exceeding the $69.9 billion combination of Citicorp and Travelers Group Inc. in 1998.
`Fair and Transparent'
ABN Amro said today that its management and supervisory boards have identified ``a number of significant risks to the consortium offer,'' including uncertainty regarding the approval of the transaction by the Dutch Ministry of Finance, and the Fortis and Royal Bank shareholders.
Fortis investors are scheduled to vote Aug. 6 on the transaction and on a plan to help finance the deal with a 13 billion-euro share sale.
``We continue to support Barclays's offer, but can't recommend it,'' because the Royal Bank-led group's bid is ``financially superior,'' ABN Amro CEO Rijkman Groenink said at a press conference in Amsterdam today. Shareholders will ultimately decide, he said today. ``A substantial part will be led by what is the highest price.''
ABN Amro will ``review the situation regularly the coming period'' and make a new recommendation before an extraordinary shareholders meeting, which will probably take place in the third week of September, Groenink said later today. There won't be a vote on the two offers.
It may be early or mid-September before the Dutch central bank rules on ``the eligibility of the Fortis offer under Dutch supervisory rules,'' Groenink said.
Supervisory board member Colin Sharman, chairman of the U.K. insurer Aviva Plc, is no longer participating in decisions about the Royal Bank-led offer because he considers himself conflicted, ABN Amro said in a filing to the U.S. Securities and Exchange Commission. Aviva's Dutch unit has exclusive rights to sell insurance through ABN Amro branches in the Netherlands.
Varley said last week that it was ``premature'' to declare the Royal Bank-led bid superior. Barclays is counting on the China and Singapore investments to lift its share price and the value of its bid for ABN Amro.
`Declining All the Time'
``The probability of Barclays succeeding is declining all the time,'' said Dale Robertson, who helps oversee about $4 billion, including Royal Bank and ABN Amro shares, at Edinburgh Partners in Scotland.
China Development Bank is one of the nation's three so-called ``policy banks,'' which support the government's development and political agenda by lending for public works and to targeted industries. The government is planning to reorganize all three into commercial, profit-oriented banks. Singapore's Temasek is the city-state's investment arm.