ABN opts for neutral stance on bids
By Jane Croft in London
Published: July 29 2007 20:03 | Last updated: July 29 2007 20:03
ABN Amro is on Monday poised to take a neutral position by not recommending any takeover offer either from Barclays or from the rival RBS-led consortium, people familiar with the situation indicated.
ABN, which reports second-quarter results on Monday, has previously recommended a bid from Barclays. However, its two boards now find themselves in an increasingly difficult position as the newly revised Barclays bid is €2 a share less than the €71.1bn ($97.2bn) bid from the RBS consortium.
The RBS-led consortium – which includes Santander of Spain and Belgo-Dutch Fortis – is 93 per cent cash, with the rest in shares. On Friday, shareholders of Santander approved the bank’s involvement in the transaction.
The supervisory and management boards of ABN have been meeting over the weekend to discuss the two bids. However, following these discussions it now seems likely that the ABN boards will offer no recommendation to investors at this stage about the bids.
One option being considered is that ABN could announce a “temporary” neutral position – but make a recommendation nearer the time when shareholders have to decide. ABN had recommended Barclays’ previous share-based offer, and had until Monday to recommend Barclays’ new revised offer.
Although Barclays was hoping to receive a recommendation from ABN, its officials have indicated to ABN Amro that they understand the board’s delicate situation.
However, up to 40 per cent of the shareholder base of ABN is now believed to be hedge funds. These – unlike traditional investors – may give little weight to management recommendations when they decide which bid to back.
There are risks associated with the consortium bid. It may face regulatory hurdles, or Fortis could fail to get shareholders’ support at its extraordinary general meeting on August 6. Fortis is considered the weak link in the consortium and there has been speculation that hedge funds have been piling into Fortis to vote against.
Separately, it has emerged that a group of hedge funds secretly approached Barclays to ask it to help scupper the consortium bid by voting against Fortis at a recent EGM. However, people close to Barclays said this proposal was firmly rejected. The Barclays bid is 37 per cent in cash and the rest in shares, which have been falling in recent days due to market turmoil.
Documents filed by Barclays on Friday show that the proposed Barclays-ABN group would have a board of 21 directors – only 10 of which would come from Barclays. Nine would come from ABN Amro, and China Development Bank and Temasek of Singapore will each have the right to nominate a non-executive director. CDB and Temasek took stakes in Barclays last week.