Barclays has just announced the outlines of its proposed merger with ABN Amro. The structure seems modelled directly on the Royal Dutch Shell arrangement: primary listing in London, headquarters in Amsterdam, unitary board, Dutch lead regulator. ABN Amro will choose the first chairman, so that should make Marcus Agius’s tenure as chairman one of the shortest ever for a FTSE 100 company (his self-sacrifice only increases his standing).
Having worried here in the blog earlier today that we would end up with a Euro-governance fudge involving dual everything, the proposed structure is a relief. Management responsibilities should at least be clear-ish (we don’t know yet the full composition of the board and what promises have been made about the other big jobs).
But this still looks like an exercise in corporate vanity which Barclays shareholders would do well to resist. A quick look at the numbers makes the financial case look slim and you have to ask yourself if you would trust this management team with a task this tough. Chief executive John Varley’s greatest contribution to M&A history so far is the Woolwich deal, which is a case study in how not to do an acquisition. Enthusiasts may point to Frits Seegers and the large number of other Citigroup veterans who now run important parts of the bank, but who knows if they are up to this and, anyway, Citi’s ability to extract value from big deals is hardly unblemished. Bob Diamond, the other main man on the Barclays board, has done an impressive job with Barclays Capital and BGI but this has been in a bull market and has not involved any tricky integrations.
And integrating ABN will be nothing if not tricky. ABN remains a disparate business with more or less unrelated businesses all around the world. If it could not integrate itself, will Barclays really be able to? Certainly, ABN brings with it an attractive emerging market business based in Brazil (plus some bits and pieces in India and the Middle East) but there is a lot of other stuff to take on as well, not least the domestic Dutch business and the wholesale bank. It is unlikely that, in the haste with which this deal seems to being negotiated, Barclays will have time to go through ABN’s loan book in real detail. Then there is the problem of what do with the distinctly ho-hum investment bank. ABN’s investment bank is in many of the areas that Diamond was reluctant to enter because he the returns didn’t make it worth building up from scratch. But if he now finds himself owning them, does he double - and invest to make ABN a more profitable investment bank - or quit, and axe most of ABN’s operations there?
The other big event of this afternoon has been the publication of the report from the US Chemical Safety and Hazard Investigation Board into BP’s Texas City disaster. This found “safety deficiencies at all levels of the BP Corporation” and blamed cost-cutting and a failure to invest properly. You can watch our the assessment of our energy editor, Ed Crooks, online now and we will have much more in tomorrow’s paper. The full report is also available through FT.com now. It’s amazing stuff.
There is some other news around as well. Much of it is financial, led by the fascinating muscle-flexing from the FSA. It has fined a former Citigroup analyst, Roberto Casoni, £52,500 for selectively giving clients details of his research before publishing it. But I’m confused. Aren’t clients entitled to a first access to a broker’s ideas? Do analysts really have to put all their ideas out on general release to everyone at the same time? Seems ridiculous. Chris Hughes is on it for us, so it will all make sense soon.
Commerzbank has confirmed it is selling Jupiter Asset Management to its management backed by TA Associates for €1bn as we have reported.
BlueBay Asset Management, the credit fund manager that floated in November, said it expected the credit market to play to its advantage over the coming two years after nearly doubling interim pre-tax profits. And Friends Provident reported a 34 per cent rise in annual pre-tax profits to £491m. The figures were in line with consensus estimates but the share price fell back sharply on cautious statements over the market outlook.
We are also planning to do plenty on today’s story about BSkyB, the satellite broadcaster, facing fresh regulatory scrutiny after Ofcom, the media regulator, launched an investigation into the pay TV market that could lead to a Competition Commission probe into the entire industry.
Rumour of day: Whitbread shares are up nearly 12 per cent this morning on renewed bid rumours. Amazingly for a FTSE 100 stock with this sort of a move, there is no statement from the company. Stake building rumours lifted Punch shares 5 per cent.