Bank of America and Barclays thought they had it easy. Well today, the European party of three (Royal Bank of Scotland Group Plc, Santander Central Hispano SA and Fortis Bank), came out to throw $98.5 billion ($72.2 billion Euros) into Barclay's face to say, we're not letting you dominate without a fight. The new pricetag on ABN Amro Holding NV now comes as the largest biggest takeover tug-a-war in in the history of banks - and 13% higher than Barclay's offer.
The fight comes mostly in part of Bank of America's interest in LaSalle, which analysts had already claimed was an overly-cheap disposal price. ABN said in a statement it has already invited the group of three to meet in Amsterdam today and is ``open'' to talks. Bank of America said in a separate statement that it expects its legal contract to buy the U.S. unit ``to be fulfilled under its current terms.'' Unfortunate for them, ABN's agreement to sell LaSalle to Bank of America included in size 12 Arial font a counter-bidder clause stating that within 14 days ABN is permitted to consider higher offers - its only been two before the three players came out. Bank of America now has five days to match or beat the bid.
ABN's share prices already jumped another 3.5% on this news, this comes on top of the 33% jump over the past few weeks leading up to a month ago. This price makes the offer 15.3 times ABN's 2006 earnings, and amount that is more than generous. In fact a 3% holder of ABN's share, TCI Fund Management LLP already said it'll back the new offer, and is suggesting to other shareholders to pressure ABN Amro's board at its annual meeting tomorrow to accept the new offer and break up the bank. Another 1% holder, Toscafund Asset Management LLP, also supports the Royal Bank approach unless there is a higher bid.
Why is Royal Bank soo keen on this offer, leading the pack of three, because if the deal goes through, Royal Bank would probably hold on to ABN Amro's Asian, North American and corporate-banking business, meaning the LaSalle unit, which could be sold for higher, and eventually putting Royal Bank head-to-head for the No. 1 spot here in London.
Just imagine...