British bank Barclays Plc and the Netherlands' ABN Amro NV announced Monday they have agreed to merge to create the world's fifth-largest banking group in a deal worth $91 billion.
The merger, which will give Barclays' shareholders 52% of the combined group, is the largest merger in the financial sector that the world has ever seen and caps month-long talks between the two groups. The proposed new merged entity will have a combined workforce of more than 215,000 staff and have 47 million customers worldwide. It will retain the name Barclays, but its headquarters will move from London to Amsterdam, where ABN Amro is based. Barclays chief executive John Varley is to lead the new group.
The deal, expected to be completed in the Q4, values the Dutch bank at €36.25 (49.26 dollars) per share, 33% more than the price on the last trading day before the talks began and slightly less than Friday's closing price of €36.29. Barclays shares declined more than 2% on the news, trading at 731 pence ($14.62) in London, as the market queried whether the envisaged synergy savings would be achieved. The two banks said they hoped to cut 12,800 from the current payroll and transfer 11,000 jobs to low-cost countries. As part of the sale, Bank of America Corp is to acquire ABN Amro's Chicago-based LaSalle Bank Corp for about $21 billion. The deal by Britain's third-largest bank would create Europe's second-largest bank in market value, behind HSBC Holdings Plc. The new merged bank will have 8,200 branches from India to South America.
The announcement came after a consortium made up of the Royal Bank of Scotland Group Plc (RBS), Spain's Santander Central Hispano SA and the Dutch-Belgian financial house Fortis also said it was interested in taking over ABN Amro and splitting it up. After criticism from the Dutch central bank that the transaction was over-complex and risky, reports said RBS would consider mounting a bid on its own. Describing the proposed deal as a "unique opportunity," Varley said: "Our combined geographic reach will ensure exposure to both developed and high growth developing economies." He expressed confidence that the merged group, which ranks fifth after Citigroup, Bank of America, HSBC and the Industrial and Commercial Bank of China, would grow. ABN Amro chairman Rijkman Groenink said: "The deal will create a very strong universal banking company. The view of of the board is that Barclays is the best partner for ABN going forward." He predicted a "steep change in growth and earnings." Groenink added, however, that he would meet RBS representatives later Monday to compare any offer with that from Barclays. (monstersandcritics.com)