President of the Dutch central bank and European Central Bank council member Nout Wellink has said the call by hedge fund TCI Fund Management for a break up of ABN Amro Holding NV, the largest Dutch bank, is a “bridge too far”.
TCI, a London-based hedge fund that led the ouster of Deutsche Boerse AG’s top executives two years ago, last week said that Amsterdam-based ABN Amro is “significantly” undervalued and should be broken up. The bank “should explore all options to merge, sell or spin off some of the assets or potentially the whole business,” says Patrick Degorce, a founding member of TCI.
The Dutch Central Bank is now “closely” following developments regarding TCI and ABN Amro, says Wellink. “We won’t let it happen that the solidity of the financial world is affected,” Wellink comments. “If ABN Amro, for example, sells one of its larger activities, how strong then is the rest? Is there still enough left over for the cost? We will force an orderly process.”
According to ABN Amro’s Chief Executive Officer Rijkman Groenink, four or five other funds have similar sized stakes to TCI, which owns about 1 percent of the bank.
If the hedge funds cooperate and want to use their voting rights together, they will have to get permission from the central bank the moment they have more than 10 percent of ABN Amro’s shares, says Wellink.
ABN Amro’s parts are worth “significantly” more than 30 euros a share, according to TCI. The lender’s stock rose 0.5 percent yesterday to 27.94 euros a share, valuing the company at 53.4 billion euros ($70.3 billion). The shares jumped 6.1 percent the day TCI made its comments.