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Tue, Jul 17, 2007 - Page 10 News List

Royal Bank Group sweetens ABN bid

TRUMPING BARCLAYS Royal Bank, along with Banco Santander and Fortis, will pay 66 billion euros in cash for ABN Amro, with the remainder paid in Royal Bank shares


Royal Bank of Scotland Group Plc sweetened its 71.1 billion euro (US$98.1 billion) offer for ABN Amro Holding NV by increasing the cash portion, seeking to trump Barclays Plc in the world's biggest banking takeover.

Royal Bank, which is bidding with Banco Santander SA of Spain and Fortis of Belgium, offered 38.40 euros a share for the biggest Dutch lender and raised the cash portion to 93 percent from 79 percent, the banks said in a statement yesterday. Barclays's all-stock offer of 34.49 euros a share was 11 percent lower.

Fred Goodwin, chief executive officer of Royal Bank, was forging ahead with the bid even after a Dutch court ruled last Friday that a takeover would not include ABN Amro's Chicago-based LaSalle Bank unit. The three banks plan to divide ABN Amro's businesses, which span 53 countries from Brazil to India.

Goodwin said the acquisition "remains compelling" because it will open up new markets and opportunities for growth.

"I still question whether they are right to take on all the execution risk without LaSalle," said Mike Trippitt, a London-based analyst at Oriel Securities Ltd.

"LaSalle for them was the real gem. It seems like they are now just looking at a lot of heartache with the consolidation of all these businesses," said Trippitt, who has a "buy" rating on the stock.

ABN Amro shares rose as much as 4.5 percent, and were 1.51 euros higher at 37.36 euros by 9:55am in Amsterdam. The stock has risen about 40 percent since the beginning of March, when speculation about a takeover started. Royal Bank shares rose 3 pence, or 0.5 percent, to 643 pence in London, while Barclays climbed 12 pence, or 1.7 percent, to 736.5 pence.

The trio of banks will pay 66 billion euros in cash for ABN Amro with the remainder in Royal Bank shares, the group said today. Though Royal Bank's previous bid, announced on May 29, was "crafted" around LaSalle, Goodwin said the Dutch bank's investment banking and Asia retail businesses are as important.

Revenue gains and cost savings will be lower without LaSalle, Goodwin told reporters on a conference call yesterday. The bank expects 1.72 billion euros of cost and revenue benefits by 2010, down from the 2.86 billion euros the bank forecast in its May 29 offer to buy ABN Amro including LaSalle.

"We have very good support from shareholders who consider it to be an attractive offer," Goodwin said yesterday. "Many people will be asking what Barclays intend to do now."

Barclays, which has pledged to keep the Dutch bank in one piece, may have to team up with another bidder or sell more ABN Amro assets to win, analysts said. A spokesman for the company declined to comment, as did Neil Moorhouse, a spokesman for Amsterdam-based ABN Amro.

Santander, Spain's biggest bank, would expand into Italy and double its market share in Brazil with the acquisition.

Fortis, the largest Belgian financial-services company, is seeking the Dutch consumer banking arm and ABN Amro's asset-management and private bank units to create a "Benelux leader."

Royal Bank and its partners are better able to cut costs and drive gains out of ABN Amro than Barclays, analysts and investors say, citing Royal Bank's track record for successfully integrating acquisitions, including its US$37.8 billion purchase of London-based National Westminster Plc in 2000.

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