ABN Amro Holding Hv‘s stock rose as much 9.8% to €29.95 in Amsterdam today, valuing the company at €57 billion ($76 billion). Barclays Plc, the UK’s No. 3 bank, said it will make a statement „clarifying the position” before business opens tomorrow after a person with knowledge of the situation who declined to be identified said the two companies are in talks. CEO Rijkman Groenink is fending off calls from investors, including TCI Fund Management, for ABN Amro to be broken up as he works to cut expenses on last year’s purchase of Italy’s Banca Antonveneta SpA and loan losses in the US, Latin America and Taiwan.
The acquisition of ABN Amro would be the world’s biggest financial-services merger. „The perception is that ABN Amro has been under some pressure for quite some time, so Barclays may not be the only potential predator out there,” said Jeremy Batstone, an equity strategist at Charles Stanley & Co. in London. „We’re really in the first foothills of what could be quite a prolonged process.” The Sunday Times said yesterday Barclays made an informal approach to ABN Amro. The Wall Street Journal said ABN Amro is resisting overtures from several unidentified suitors. BNP Paribas SA and Societe Generale are among banks that have signaled interest in making a bid for ABN Amro, the Journal said today, citing unidentified people familiar with the matter.
Societe Generale spokeswoman Stephanie Carson-Parker, BNP Paribas spokesman Jonathan Mullen, HSBC Holdings Plc spokesman Richard Lindsay and Royal Bank of Scotland Group Plc spokeswoman Carolyn McAdam declined to comment. Spokespeople for Citigroup Inc., Bank of America Corp., Santander Central Hispano SA and Banco Bilbao Vizcaya Argentaria SA also declined to comment. Barclays CEO John Varley told analysts a month ago that he wants the London-based bank to grow „aggressively” and would consider purchases to enter emerging markets. Acquiring ABN Amro, which has branches in 53 countries and owns LaSalle Bank in Chicago, would help Barclays to extend retail banking outside the UK and build up its securities, asset- and wealth-management arms, Lambert said. The bank might offer about €60 billion ($80 billion) for Amsterdam-based ABN Amro, according to Keefe, Bruyette & Woods Ltd. analyst Jean-Pierre Lambert. Other Anglo-Dutch accords include Royal Dutch Shell Plc and Unilever NV.
ABN Amro shares traded at €29.63 as of 2:17 p.m. today. Barclays shares rose 0.2% to 684 pence in London, giving it a market value of £44.8 billion ($87 billion). „It makes sense on a strategic and geographical basis,” said Guy de Blonay, a London-based fund manager at New Star Asset Management Group Plc, who helps oversee about $34 billion and holds shares of both companies. He said any bidder may offer at least €35 a share. „Barclays is looking for something in Brazil, more in the US and wants to expand in Italy.”
ABN Amro stock rose 7.4% in the month through March 16, the best performer in the 72-member Bloomberg Europe Banks and Financial Services Index. Barclays shares fell 13% in the same period. ABN Amro’s price-to-earnings ratio inched up to 9.7 last week, just ahead of Barclays for the first time in a year. ABN Amro’s stock has been fueled by takeover speculation since February 21 when TCI, a UK hedge fund that led the ouster of Deutsche Boerse AG’s top executives two years ago, said the bank is „significantly” undervalued. The company relied on asset sales to increase Q4 profit by 4.9% to €1.36 billion.
„Financial investors are interested because selling off its units individually would be worth more than the whole company,” said Konrad Becker, a banking analyst at Merck Finck & Co. in Munich. „Its weak profitability is making it so vulnerable.” UBS AG, Morgan Stanley and Lehman Brothers Holdings Inc. have been retained by ABN Amro as advisers. ABN Amro, the product of a 1991 merger of the two biggest Dutch banks, made half of its revenue last year from interest income on loans, a quarter from commissions, and most of the remainder from trading and investment banking. The company got embroiled last month in a boardroom battle at Rome-based Capitalia SpA, where it is the largest shareholder. CEO Matteo Arpe won the backing of a group of shareholders led by ABN Amro just hours before the directors were scheduled to consider a motion to fire him. Barclays said on February 20 that H2 net income jumped 41% to £2.26 billion. Growth was spurred by the Barclays Capital securities unit under President Robert Diamond, which accounted for about one third of pretax profit.
The bank makes half of its profit outside the UK. „Our exposure to emerging markets is still quite low,” Varley said on a conference call when the bank reported earnings on February 20. „We would like to increase our exposure to them.” Barclays, which doesn’t have any retail and commercial banking presence in Asia-Pacific except for India, can tap ABN Amro’s markets in India, Singapore, Hong Kong, Taiwan, China, Pakistan, Indonesia and Malaysia. Barclays’ strongest profit growth in the H2 of 2006 came from international retail and commercial banking, where pretax profit increased 59%. ABN Amro’s consumer-banking clients in the region rose by 18% to 3.3 million last year and the number of credit cards issued increased by 19% to 2.8 million, with India and Greater China driving growth, according to the bank.
Barclays plans to start a wealth-management unit in India this year. ABN Amro, which has 28 branches in India, said last week it may hire as many as 2,000 more employees in the country to provide global support services in the next 12 months. ABN Amro was the top merger adviser in India last year, arranging 36% of the record $31.5 billion of deals. The Dutch bank also operates a mutual fund and offers securities trading and retail stock brokering services for individual investors.
Barclays employs 3,000 people in the Asia-Pacific region, compared with more than 14,000 at ABN Amro. More than four-fifths of Barclays’ employees in the region work with the investment banking division. The shares, which have more than doubled since March 2003, fell 14% from a record 790 pence on February 23 through March 16, hurt by industry-wide concerns about stock-market volatility and rising US mortgage defaults. Barclays is the UK’s third-biggest bank after HSBC and Royal Bank of Scotland Group Plc. HSBC shares fell 0.7% to 880 pence on March 16, giving the London-based bank a market value of £102 billion. (Bloomberg)
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