May 29, 2007
The RBS Consortium's Offer for ABN Amro
The Royal Bank of Scotland Group plc, Fortis and Santander today announced the terms of their proposed €71.1 billion offer for ABN Amro. If completed, it would be the largest financial services deal in history. According to the consortium, its bid is at a 13.7% premium to the competing €64 billion bid from Britain's Barclays plc supported by ABN Amro. The consortium is offering €38.40 per ABN share comprising 79% cash with the remainder consisting of new RBS shares. But the group will also hold back €1 a share in cash (or $2.5 billion) as a reserve against litigation costs and damages that might arise from the Bank of America's lawsuit against ABN Amro to enforce the sale of LaSalle Bank to it. In a just world this would be money that would come out of the pocket of ABN Amro CEO, Rijkman Groenink and the ABN Amro Supervisory Board for mucking up this sale process instead of their shareholders.
The group detailed the financing arrangements for the bid, and also detailed their plans to break-up ABN Amro upon its acquisition: RBS will acquire ABN Amro's Global Wholesale Businesses (including the Netherlands but excluding Brazil), LaSalle Bank and International Retail Businesses for a consideration of €27.2 billion. The full offer document can be accessed here. The group will now proceed to have their required shareholder meetings and expect to commence the full offer in August of 2007. However, this is a pre-conditional offer -- certain conditions must be satisfied before the full offer can commence. The most significant pre-condition is one requiring a favorable ruling on the currently pending litigation over the LaSalle matter. It requires that:
The preliminary ruling of the Dutch Enterprise Chamber that the consummation of the Bank of America Agreement should be subject to ABN AMRO shareholder approval has been upheld or otherwise remains in force, whether or not pursuant to any decision of the Dutch Supreme Court, or of any other judicial body, and ABN AMRO shareholders have failed to approve the Bank of America Agreement by the requisite vote at the ABN AMRO EGM.
Thus, like many a U.S. takeover, the final disposition of ABN Amro will be decided by the courts. The Dutch Supreme Court is expected to rule in July or August. Until then, there will continue to be significant uncertainty in the market over the RBS-bid and the future of ABN Amro.
NB. The RBS group has also decided to take a different course in this offer document with respect to the acquisition of LaSalle Bank. The consoritum offer itself, once it commences, is now conditioned upon "ABN AMRO shareholders hav[ing] failed to approve the Bank of America Agreement by the requisite vote at the ABN AMRO EGM convened for that purpose." The group's previous offer was cross-conditional on ABN Amro reaching an agreement to sell LaSalle directly to RBS. Now, it appears RBS is content to acquire only ABN Amro, and subsequently purchase LaSalle.
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