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ABN Amro, the listed Dutch bank, is unlikely to recommend either of the two revised offers to its shareholders by 30 July, the date by which Barclays asked for it to make a decision, it has been suggested.
The Dutch bank may need longer to assess the effect of the initiatives announced by Barclays yesterday (23 July) on the value of the UK bank’s revised offer.
It was also pointed out that, under Dutch law, ABN Amro can opt to remain neutral and ask shareholders to make their own assessment of the two offers. So, while ABN may decide to make a recommendation at a later date, there was also a strong possibility that the Dutch bank opts to remain neutral through the remainder of the process.
Barclays yesterday announced a revised cash and share offer of EUR 13.15 in cash and 2.13 ordinary shares in Barclays per ABN Amro share, which at Barclays’ current share price, is valued at about EUR 36 per share. This compares to the revised offer submitted by the RBS-led consortium which is largely in cash and worth over EUR 38 per share.
Barclays’ bid is conditional on approval from both the supervisory and management board of ABN. John Varley, chief executive officer of Barclays, described this as a “hard” condition at a press briefing today, but it is understood that Barclays may pursue its offer if ABN decides to remain neutral.
Barclays also acknowledged that the success of its offer is now largely resting on how the market reacts to its announced partnership with China Development Bank [CDB] and how this seeps into its share price.
Barclays is said to have now embarked on a roadshow to sell the upside of the tie-up to the markets.
Under the agreement, signed this morning, state-owned CDB and Singapore-based Temasek will invest up to EUR 13.4bn in Barclays and each will take a seat on the UK bank’s board. Barclays believes the tie-up will give it unprecedented access to customers in China.
At the press briefing, Varley said the group had not quantified the financial impact of the deal, but expected it to be material.
Insiders at Barclays were also reluctant to be drawn into estimating the upside from the Chinese tie-up, however, the UK bank will need to see its share price rise by around 9% over the next couple of months for its revised offer to match the bid on the table from the consortium. It was acknowledged that the success of its bid largely rests with the value of its share price at the time when ABN shareholders will make their decision, which Barclays estimates to be late September.
At the press briefing, Bob Diamond, president of Barclays, explained there were five key areas where the tie-up is expected to result in growth for Barclays.
Barclays asset management arm, Barclays Global Investors [BGI] will automatically become the preferred asset partner to CDB, while Barclays’ commodities business is also expected to see a boost as it works with CDB to provide commodity risk management solutions to Chinese companies.
Barclays Capital will be ideally positioned to provide its suite of risk management solutions to Chinese state-owned enterprises, while Barclays’ African franchise is set to benefit as trade between Africa and China increases, said Diamond. Lastly, the combined Barclays and ABN would become one of the largest players in global payments and trade finance due to the level of trade finance generated out of China.
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