Investment fund TCI tried to spark a bidding war for Dutch group ABN Amro on Tuesday, seizing on marriage talks by British bank Barclays with an invitation to other banks to make offers.
Prospects of a bid have pushed up shares in ABN Amro and Barclays, which revealed overnight that they were in ”exclusive” talks to create a vast global bank with complementary interests around the world.
A deal would create the world’s sixth-biggest bank at valuations when trading closed on Monday, capitalised at $162-billion. It would be the second-biggest bank in Europe and Britain after HSBC.
British investment fund TCI, a leading shareholder in ABN Amro that wants to see the bank broken up, said it was ”encouraged” by the preliminary talks with Barclays.
”While TCI are encouraged by this development … we hope that the exclusivity granted to Barclays plc will not prevent the board of ABN Amro from employing a process that considers bids by other credible institutions in order to produce the best result for shareholders,” TCI said in a brief statement.
ABN Amro is the biggest bank in The Netherlands. A bid by Barclays would make strategic sense by enabling the British bank to expand further across Asian and American markets, London-based analysts said.
The mooted tie-up was also viewed as being positive for ABN Amro, which is facing break-up demands from hedge-fund investors TCI and Toscafund, which want management to sell assets separately to make profits for shareholders.
Barclays is the third-biggest bank in Britain with interests also in Europe, Asia, the United States, the Middle East and Africa.
ABN Amro has also expanded into emerging markets in Asia and has interests in Canada, Italy, Mexico and the US. It has 4 500 branches in 53 countries.
The combined enterprise would have 47-million clients and employ 220 000 people in 50 countries.
In afternoon trading in London on Tuesday, the price of shares in Barclays surged by 3,89% to 703,36 pence. The group’s shares had fallen by nearly 1% on Tuesday on concern among analysts that Barclays might overpay.
”Although we do think cost-efficiency improvements could drive value creation in a merged group, a bid-fuelled jump in ABN’s share price could sap the potential,” said Panmure Gordon analyst Sandy Chen.
He added: ”Broadly speaking, the two groups complement each other strategically, both in terms of geographical distribution and business mix.”
Shares in ABN Amro, which is listed on the Amsterdam Stock Exchange, surged 3,07% to €30,86 in early-afternoon deals on Tuesday, after a 9,6% jump the previous day.
Meanwhile, Moody’s Investors Service gave an upbeat assessment of the merger deal, saying that Barclays would gain a ”significant” presence in the US retail market, besides creating a strong retail franchise across some major European markets.
”Moody’s noted that on the upside the potential link-up with ABN Amro would give Barclays the significant presence in the US retail market, via ABN Amro’s LaSalle Bank, which it currently lacked,” Moody’s said in a note to clients.
The note added: ”The link-up would also give Barclays more exposure to developing markets, including Brazil where ABN Amro’s Brazilian operation — comprising Banco Real and including Banco Sudameris — plays a key role in the bank’s retail strategy.”
Moody’s said it is not taking any rating action given considerable uncertainty regarding the outcome of the transaction. — Sapa-AFP