ABN Amro and Barclays PLC announced Monday they have agreed to merge in one of the largest cross-border combinations in European banking history.
Barclays offered $49.25 for each ABN share, slightly lower than Friday's closing price of $49.38, the banks said. As part of the deal, ABN announced it is selling its U.S. unit LaSalle Bank to Bank of America Corp. for $21 billion in cash.
News reports put the value of the merger at around $95 billion.
"The proposed merger of ABN Amro and Barclays will create a strong and competitive combination for its clients with superior products and extensive distribution," the banks said in a statement. "The merged group is expected to generate significant and sustained future incremental earnings growth for shareholders."
The banks said the merger would create a single bank, headquartered in Amsterdam, with 47 million customers worldwide.
For each share, ABN Amro shareholders will be offered 3.225 ordinary shares in the new group, to be called Barclays PLC.
The group said it expected to save $4.8 billion annually in synergies by 2010
Barclays' John Varley will be the chief executive officer, and Bob Diamond will be president. The new board will initially consist of 10 members from Barclays and nine members from ABN AMRO. Arthur Martinez, chairman of ABN Amro's supervisory board, was will be nominated as chairman.
No role was mentioned in the new group for Rijkman Groenink, ABN Amro's chief for the last seven years, a period when major shareholders judged the bank's holdings to have underperformed.
The merger was expected to be completed during the fourth quarter of this year, the banks said.
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Barclays Agrees to Purchase ABN Amro for $91 Billion (Update7)
April 23 (Bloomberg) -- Barclays Plc, Britain's third- largest bank, agreed to buy ABN Amro Holding NV for 67 billion euros ($91 billion) in the world's biggest financial-services acquisition.
Barclays offered 3.225 new shares for each share of ABN Amro, amounting to 36.25 euros a share when the Dutch bank's final dividend is included, the banks said today. The bid is 33 percent above ABN Amro's price on March 16, the last trading day before talks were announced. In a related deal, ABN Amro agreed to sell Chicago-based LaSalle Bank to Bank of America Corp.
The takeover of Amsterdam-based ABN Amro will create a company with about 217,000 employees, 47 million customers and the second-highest market value among European banks after HSBC Holdings Plc. The agreement may thwart plans by Royal Bank of Scotland Group Plc, Santander Central Hispano SA and Fortis to make a rival offer. The group scrapped a planned meeting with the Dutch bank today.
``The whole world will now look at what RBS, Santander and Fortis will do,'' said Joost de Graaf, who helps manage about $675 million at Kempen Capital Management in Amsterdam, including ABN Amro and Barclays shares. ``It would be an enormous surprise if they didn't'' make a counterbid.
ABN Amro shares fell 58 cents, or 1.6 percent, to 35.71 euros at 4:04 p.m. in Amsterdam, valuing the bank at 68.1 billion euros. Barclays's stock fell 17 pence, or 2.3 percent, to 733 pence ($14.65) in London.
Cutting Costs
Barclays Chief Executive Officer John Varley will be CEO of the combined bank, and 55-year-old Robert Diamond, who runs Barclays's investment bank, will be president. Arthur Martinez, 67, ABN Amro's chairman, will have the same role at the enlarged company. The new bank's headquarters will be in Amsterdam.
``The plans we have set out are sensible and deliverable,'' Varley, 51, said on a conference call with journalists today. ``The new entity provides our employees with a new and exciting future as one of the largest banks in the world.''
London-based Barclays plans to slash about 12,800 jobs, or almost 6 percent of the combined workforce excluding LaSalle, to help reduce costs by 2.8 billion euros. The bank would move an additional 10,800 positions to ``low-cost locations.''
ABN Amro CEO Rijkman Groenink, 57, told reporters that Barclays is ``the best partner'' for the Dutch bank, while adding that he's still open to competing offers.
`Start of the War'
Royal Bank of Scotland and its partners have said they are considering a breakup of ABN Amro. Santander, Spain's largest bank, would take the Latin American business as well as ABN Amro's Italian holdings, UBS AG analyst Stephen Andrews said in a note on April 16. Fortis, based in Brussels and the Dutch city of Utrecht, may keep the Dutch operations as well as the private equity and private banking arms.
``This seems to be the start of the war rather than the end,'' said Simon Willis, an analyst at NCB Stockbrokers in London, who has a ``buy'' rating on Barclays.
The group may be able to pay 40 euros a share or more for ABN by eliminating more jobs and overlap than Barclays, analysts at Keefe, Bruyette & Woods Ltd. have said.
Bank of America
Royal Bank, led by CEO Fred Goodwin, is most interested in ABN Amro's LaSalle unit, its Asian division, and its investment bank, said Andrews of UBS. ABN Amro's decision to sell LaSalle to Charlotte, North Carolina-based Bank of America for $21 billion in cash has complicated Royal Bank's plans.
The Royal Bank-led group said in a statement they were canceling the planned meeting with ABN Amro while they seek more information on how the sale of LaSalle could be terminated.
Barclays and ABN Amro said they plan to return an estimated 12 billion euros in excess capital to shareholders following the sale of LaSalle, mainly through a stock buyback. Buying LaSalle will make Bank of America the biggest bank in Chicago and fill in one of the few remaining holes in the nation's most extensive branch network.
The offer for ABN Amro comes two months after London-based hedge fund TCI Fund Management LLP, run by Christopher Hohn, called on Groenink to consider breaking up the company. TCI said today it's studying the terms of the offer and may comment ``in due course.''
Barclays agreed to pay 2.8 times ABN Amro's book value, more than the 2.1 times Milan-based Banca Intesa SpA paid last year in its 27 billion-euro takeover of Sanpaolo IMI SpA, Bear Stearns Cos. analysts said in a note today.
``Barclays looks to have paid a lot for ABN Amro,'' said Colin Morton, who helps manage $1.8 billion at Rensburg Sheppards Plc in Leeds, including Royal Bank and Barclays shares. ``What Barclays have tried to do is to make it much more difficult for anyone else to break the agreement.''
Rising Profit
ABN Amro was advised by Lehman Brothers Holdings Inc., Morgan Stanley, N.M. Rothschild, UBS AG and its own investment bank. Morgan Stanley and UBS each provided a fairness opinion to the management board. Goldman Sachs Group Inc. gave a fairness opinion to ABN Amro's supervisory board. Barclays was advised by Credit Suisse Group, Deutsche Bank AG, JPMorgan Cazenove and Lazard Ltd., as well as Barclays Capital.
ABN Amro's agreement with Bank of America permits the Dutch bank to reach a deal to sell LaSalle at a higher price within 14 days and allows Bank of America to match any higher offer. The U.S. bank may get a payment of $200 million if the agreement is terminated ``under certain limited conditions.'' Barclays and ABN Amro also agreed to a 200 million-euro breakup fee.
Lead Regulator
Britain's Financial Services Authority would be the main regulator for the enlarged bank, the companies said.
Jonathan Todd, a spokesman for European Union Competition Commissioner Neelie Kroes, declined to comment on the proposed transaction at a regularly scheduled news briefing today.
ABN Amro was the product of a 1991 merger of the two biggest Dutch banks. The company made half its revenue last year from interest income on loans, a quarter from commissions, and most of the remainder from trading and investment banking.
ABN Amro entered takeover negotiations after the 2006 purchase of Italy's Banca Antonveneta SpA increased costs and bad loans rose in the U.S., Latin America and Taiwan. First-quarter profit this year increased 31 percent, helped by a gain from the sale of its U.S. mortgage business, it said April 16.
Barclays, which traces its roots back 300 years to banker James Barclay, is the U.K.'s No. 3 bank after HSBC and Royal Bank. It said on Feb. 20 that 2006 net income jumped 33 percent to 4.57 billion pounds, spurred by its Barclays Capital securities unit. Barclays Capital, led by Diamond, contributes about a third of the bank's pretax profit.
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