By Jane Croft and Peter Smith-FT.com
Published: March 20 2007 08:01 Last updated: March 20 2007 08:11
The activist hedge fund which has been urging a break up or sale of ABN Amro said on Tuesday it was “encouraged” that Barclays was in “exclusive preliminary discussions” to buy the embattled Dutch bank in a move that would create one of the world’s biggest financial institutions with a market capitalisation of more than £80bn.
However The Children’s Investment Fund said it hoped the exclusivity granted to Barclays, the UK’s third largest bank, would not prevent ABN ‘s board from employing a process which “considers bids by other credible institutions” in order to produce the best result for shareholders.
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Barclays' Diamond Says `Confident' on ABN Amro Talks
March 27 (Bloomberg) -- Barclays Plc President Robert Diamond said he is ``very confident'' about the U.K. company's talks to buy ABN Amro Holding NV, the biggest Dutch bank.
``We are in a very strong position,'' Diamond told reporters today at a financial-services conference organized by Morgan Stanley in London. Barclays Chief Executive Officer John Varley and Diamond have had ``terrific meetings with shareholders,'' he said.
Barclays, the third-largest U.K. bank, said on March 20 it agreed on some merger terms with ABN Amro for what would be the world's biggest financial-services takeover. Merrill Lynch & Co. analyst Guy Moszkowski wrote in a report yesterday that speculation about an alternative bid by New York-based Citigroup Inc. would be justified because of a ``good fit.''
``We are very focused on value,'' Diamond said. Barclays shares fell 2 percent to 727 pence at 11:50 a.m. in London. Shares of ABN Amro rose 0.1 percent at 32.77 euros in Amsterdam, valuing the Dutch bank at 62.6 billion euros ($83.5 billion).
A deal with ABN Amro would help London-based Barclays extend retail banking outside the U.K. to Italy, the U.S. and India and build its securities, asset- and wealth-management units. The banks last week agreed that the new company would be based in Amsterdam, ABN Amro's home city, and that Barclays would appoint the CEO and ABN Amro the chairman.
`Higher Price'
``Even if they come up with an agreement the question is whether someone else is going to want to come in at a higher price,'' said Colin Morton, a fund manager at Rensburg Sheppards Plc in Leeds, England. He helps manage about $1.8 billion of stock including Barclays. ``Until we see the details of the deal it is difficult to take a view,'' he said.
Barclays' biggest shareholders are Lloyds TSB Group Plc, which oversees a 5.3 percent stake, Legal & General Group Plc, and Barclays employee benefit trusts, Bloomberg data show.
Citigroup, the biggest U.S. financial-services company, would have to pay about $85 billion to $90 billion, about a third of its market value, to foil Barclays' approach, analyst Moszkowski wrote. Citigroup could cut 12 percent of costs and would benefit from ABN Amro's Brazilian unit and LaSalle retail bank in Chicago, where ``Citi's presence is weak,'' he wrote.
``We would not rule out an approach, even though there are obstacles beyond the obvious messiness of trying to break up friendly negotiations,'' wrote Moszkowski, a former Citigroup employee who is the No. 1 U.S. brokerage analyst according to Institutional Investor's annual survey. He has a ``buy'' rating on Citigroup stock.
Shares of Barclays have risen 6.5 percent since March 16 before speculation about a takeover began, valuing the bank at 47.5 billion pounds ($93 billion). ABN Amro shares have surged 20 percent.
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