Barclays bid for ABN Amro in jeopardy

Barclays’ efforts to vault itself into the top echelon of world banking through a friendly merger with ABN Amro were on Friday night in serious jeopardy after three of Europe’s largest banks approached the Dutch lender with a rival break-up proposal.

Royal Bank of Scotland, Santander of Spain and Fortis, the Belgo-Dutch banking and insurance group, on Friday wrote to ABN Amro seeking exploratory talks about a deal that would effectively carve up the bank’s operations. They said they had “requested access to the same due diligence information given to Barclays”.

The approach could pit those determined to maximise shareholder value against those seeking to keep the 183-year-old bank largely intact.

The proposal is an audacious attempt by Sir Fred Goodwin, chief executive of Royal Bank of Scotland, and Emilio Botín of Santander to maintain their position as Europe’s leading bankers and see off a challenge by Barclays, which has for the past four weeks been negotiating a deal with ABN Amro that would create the world’s fifth-largest bank.

The proposed approach - likely to be worth around €65bn (£44bn, $88bn) - by the three banks would see each seize roughly a third of ABN Amro’s operations. Royal Bank of Scotland would buy ABN Amro’s US subsidiary and its investment banking business, which is largely based in London. The bank’s operations in Brazil and Italy would be sold to Santander, while Fortis would take control of its Dutch retail bank, as well as its private banking and asset management operations.

According to people familiar with the matter, the consortium suggested in its letter that its proposal would be likely to deliver more value to ABN Amro shareholders than an offer from Barclays, though it did not set out a specific price.

ABN Amro activist shareholder The Children’s Investment Fund welcomed the announcement of an invitation to the Dutch banking group to exploratory talks by the RBS consortium. “As ABN Amro shareholders, we believe that the fiduciary duties of the supervisory and management boards require that the Royal Bank of Scotland consortium is allowed to proceed immediately with due diligence on a basis equivalent to Barclays for there to be a fair and transparent process which maximises shareholder value,” TCI managing partner Christopher Hohn said in a statement.

Analysts have calculated that RBS and Santander could afford to offer more than €40 per share for ABN Amro, and the involvement of Fortis – which already has extensive operations in the Benelux – is likely to increase that target even further. By comparison Barclays, which has limited overlap with ABN Amro, is expected to offer no more than €35 per share.

However, no bank of ABN Amro’s size has ever been broken up before and the consortium’s bid is expected to be extremely complex. It will also face intense scrutiny from politicians and regulators.

The three banks, which are being advised by Merrill Lynch, are expected to argue that they have more experience of executing large takeovers. Sir Fred has built his career on large deals such as the hostile takeover of Natwest, while Mr Botín has also carried out a string of successful deals, including the takeover of the UK’s Abbey National in 2004.

RBS, Santander and Fortis all declined to comment.

Additional reporting by Ian Bickerton in Amsterdam and Leslie Crawford in Madrid