The activist hedge fund which has been urging a break up or sale of ABN Amro said on Tuesday it was “encouraged” that Barclays was in “exclusive preliminary discussions” to buy the embattled Dutch bank in a move that would create one of the world’s biggest financial institutions with a market capitalisation of more than £80bn.
However The Children’s Investment Fund said it hoped the exclusivity granted to Barclays, the UK’s third largest bank, would not prevent ABN ‘s board from employing a process which “considers bids by other credible institutions” in order to produce the best result for shareholders.
It said it would not comment on the merits of a Barclays/ABN deal until it had seen a formal proposal.
Barclays has said that talks were at an “early and exploratory stage”, adding there was no certainty of a transaction.
However, the decision to enter exclusive talks suggests Barclays and ABN Amro have agreed the outline of a transaction.
Analysts have argued that other potential bidders could afford to pay more than Barclays because they could slash more costs from overlapping operations.
Stuart Graham, analyst at Merrill Lynch, said: “It is not clear to us that Barclays can offer the highest price for ABN Amro amongst other potential suitors.”
He argues that banks such as HSBC, Santander, BBVA and Royal Bank of Scotland could achieve greater synergies.
HSBC, he estimates, could make synergies of E3.5bn and pay up to E48 per share. By contrast Barclays could make synergies of E3bn and pay upwards of E35 per share.
ABN shares added another 3.5 per cent at the open on Tuesday, having gained 10 per cent on Monday. Barclays slipped nearly 1 per cent, adding to similar losses on Monday.
Last night, ABN Amro issued a statement saying it was in talks with Barclays as part of its ”continuous strategy” to explore value creation.
A deal would combine ABN Amro’s spread of operations - which include banks in Brazil, the US, the Middle East and Asia - with Barclays’ presence in fund management, investment banking and credit cards.
It would also help Barclays, also a rumoured takeover target for big US financial institutions, to break into the top league of the world’s largest banks.
Barclays and ABN Amro have talked about a deal at least three times over the past seven years.
Barclays’ management team, led by John Varley, chief executive, would be expected to retain many of the top jobs in the combined bank, which would also be expected to retain a London listing.
However, a head office in Amsterdam may also be retained, providing the Dutch central bank with a role in regulating the combined bank.
ABN Amro shares on Monday jumped nearly 10 per cent to €29.70 on news of Barclays’ interest.
Jon Peace, analyst at Fox, Pitt Kelton, said: “We believe that a Barclays approach is absolutely credible and we have put these two together before.”
Shortly after trading began in London Barclays shares closed were 5½p lower at 672p, valuing the UK’s third largest bank at about £44bn. ABN shares rose 3.8 per cent to €31.07.