Monday, July 23, 2007
Barclays today announced that it had raised its offer for ABN AMRO. The increased offer is €13.15 in cash and 2.13 Barclays shares for each ABN AMRO share. The increased offer is worth €35.73 per ABN AMRO share based on the July 20 closing price of Barclays. On this basis, the total consideration offered by Barclays is €67.5 billion with approximately 37% in cash. This €2.9 billion increase in offer consideration is still lower than the bid by the Royal Bank of Scotland consortium. That mostly cash bid is offering €71 billion or approximately €38.40 per share. Apparently, Barclays is hoping its share price will increase on the new offer making its bid more attractive to ABN AMRO shareholders.
In connection with the increase, Barclays also announced that China Development Bank and Temasek Holdings will invest €3.6 billion in Barclays. China Development Bank will invest €2.2 billion by buying 201 million Barclays shares at 720 pence a share. Temasek will invest €1.4 billion by buying 135 million shares at 720 pence a share. Contingent upon completion of an acquisition of ABN AMRO, the two parties will invest an additional €7.6 billion in Barclays. Barclays plans to purchase up to €3.6 billion worth of its shares to address the dilution caused by this share issuance.
Needless to say, the twist here is the second large investment by the Chinese government in recent months in a western financial institution. The previous one was the $3 billion invested in Blackstone Group by a financial arm of the Chinese government. According to Barclays, Blackstone also had a role in this purchase, advising the China Development Bank. And, with over $1.2 trillion in foreign reserves, expect more of these investments by the Chinese government.