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Shareholders told ABN Amro board to reject takeover bids

ABN Amro's board will not recommend either of the two rival takeover bids the Dutch bank has received, it told shareholders yesterday.

The Barclays PLC bid fits better with ABN's own corporate strategy while the one from a consortium led by Royal Bank of Scotland (RBS) PLC is worth more, but risky, ABN's board said.

Either takeover, if successful, would be the largest in the history of the financial industry. ABN Amro Holding NV shareholders meet on Thursday to discuss the rival bids, which expire on Oct. 4 and 5 respectively.

"The combination with Barclays remains consistent with the strategic intent of ABN Amro as an institution," the statement said.

"Furthermore, the ABN Amro boards are not in a position to support the break up of ABN Amro [as planned by the consortium] but acknowledge that the consortium offer ... is clearly superior for the ABN Amro shareholders from a financial point of view," it said.

At Friday's closing prices, the mostly cash bid by RBS was worth 70.2 billion euros (US$97.4 billion), or 37.91 euros per ABN share -- 19 percent more than Barclays' mostly share bid.

However, ABN shares closed at 35 euros, signaling investors still have doubts as to whether the RBS deal will prevail.

While Barclays' bid has passed all regulatory hurdles, the RBS bid awaits approval from EU competition authorities, and a statement of "no objection" from Dutch financial authorities.

In addition, amid recent turmoil on credit markets, there is some question as to whether the consortium members could run into trouble arranging financing for their deal -- even though all members have strong credit profiles and underwriting agreements are in place with prestigious financial management companies like Merrill Lynch.

Among the consortium, Fortis NV of Belgium wants ABN's Dutch operations, Banco Santander Central Hispano SA wants its Brazilian and Italian arms, and RBS wants the rest, including ABN's investment banking arm.

ABN said the amount of money the consortium still needs to raise "is high in absolute and relative terms and market circumstances are volatile at this point in time."

It hinted at the risk the consortium could lower or walk away from its offer, citing the "Material Adverse Change" clause in its offer documents, which ABN described as "broadly-worded."

ABN vowed to work with Dutch and European regulators to resolve any conditions imposed on a deal with RBS, if it is the one shareholders approve.

"Nevertheless, the ABN Amro boards continue to see additional business and operational risks" in the RBS deal, they said.
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