Page 409 - The Case Lab Book

RBS – ABN TAKEOVER: Cui Bono

The battle is over! All that is left is the division of the spoils of the largest takeover bid for
th
a European bank. On 8 October, 2007 about 86% of ABN Amro's shareholders accepted
a €70.6bn ($99.8bn; £49bn) offer, €66 billion of which was in cash, by a consortium led
by the Royal Bank of Scotland, Britain’s second largest bank, to secure the world’s biggest
ever banking takeover and the first time any large European bank had succumbed to a
cross-border hostile bid.

th
Barclays’ decision on 5 October to withdraw from the conflict came after it obtained
less than 1% of the share acceptances for its €62.2 bn ($87.9 bn) cash (37%)-and-
equity (63%) bid. It had required 80% backing from ABN’s 1.9bn outstanding shares.
This left the field to the consortium to acquire the Dutch bank and split it three ways.
The break-up involved 4,500 branches across 53 countries and unravelling businesses
ranging from cash management operations in Asia to retail banking in Brazil. Barclays'
bid was 63 per cent in shares.

Barclays' withdrawal had been widely expected as its cash-and-shares offer had been
undermined by the worldwide sell-off in banking stocks in the wake of the credit
squeeze following on from the collapse of the US sub-prime market in October 2007. It
was 13 percent below the mostly cash RBS-led bid.

The Sequence of Events

ABN AMRO was in the period of 1991 till 2007 one of the
largest banks in Europe and had operations in about 53
countries around the world. Originated in the Netherlands, its history dated back to
1824. ABN ranked eighth in Europe and 13th in the world based on total assets, with a
staff of over 110,000 full-time equivalents and total assets of €999 billion (as of
September 30, 2006).

In an open letter in February The Children’s Investment (TCI) hedge fund, (an investor
with a 1% stake in ABN), asked the Chairman of the ABN Supervisory Board to actively
investigate a merger, acquisition or break up of ABN, stating that the current stock price
didn't reflect the true value of the underlying assets. TCI asked the chairman to put their
request on the agenda of the annual shareholders meeting of April 2007.