Royal Bank of Scotland Group Plc sweetened its 71.1 billion-euro ($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, Bloomberg reports.
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 level of cash to 93 percent from 79 percent, the banks said in a statement today.
Fred Goodwin, the chief executive officer of Royal Bank, is forging ahead with the bid even after a Dutch court ruled that a takeover won’t include ABN Amro’s Chicago-based LaSalle Bank unit.
“I still question whether they are right to take on all the execution risk without LaSalle,” says 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,”‘ says Trippitt, who has a ‘buy’ rating on the stock.
Revenue gains and cost savings will be lower without LaSalle, Goodwin told reporters on a conference call today.
The Barclays bid will produce “better long-term value” for ABN Amro shareholders, CEO John Varley said today in comments passed on by a spokesman. He said Barclays will only proceed with the transaction on terms that produce the “right results” for its shareholders. “We have high benchmarks for returns and we will not compromise them,” Varley says.
Royal Bank and its partners are better able to cut costs and drive gains out of ABN Amro than Barclays, analysts and investors say.
“The guys ultimately with the biggest, deepest pockets will win,” says Roger Nightingale, global strategist at Millennium Global Investments. “That absolutely means the Royal Bank group, not Barclays.”
Barclays and the Royal Bank group have to make formal offers for ABN Amro on or before July 23, with shareholders of Barclays and Royal Bank voting to approve the bids in August.