Page 414 - The Case Lab Book

On 5th May, the consortium went on to the • ABN AMRO's goal is to be in the top five of its
attack and launched its hostile bid for ABN peer group at the end of every four-year
cycle.
itself. The consortium bid was 25 times • ABN AMRO has also adopted a financial
ABN’s current annual earnings. target of 20% average return on equity over
the period 2005—2008.

Rijkman Groenink and his board argued that the Barclays takeover was more consistent
with ABN's own strategy and that while the consortium bid was worth more money, it
also carried greater risk. His concerns focussed on:

• a lack of transparency on the part of the consortium’s proposals e.g. its financing
and deliverability given the regulatory risk.
• concerns whether the consortium, especially Fortis, could fund the takeover in
the uncertain market conditions.

In June, it emerged a "tartan mafia" of Scottish fund managers, including Standard Life
Investments, Scottish Widows and Baillie Gifford, held the future of each bid in the
balance because of the size of their stake in both RBS and Barclays. Royal Bank's cost-
to-income ratio was 42.1 percent in 2006, compared with 59 percent at Barclays. In the
end, they leaned towards the RBS bid because Sir Fred had a more successful record
at integrating deals than John Varley CEO of Barclays.

In July, the Dutch Supreme Court ruled that ABN's sale of LaSalle was lawful -
overturning the lower Superior Court’s move blocking the sale.

Barclays' sense of having turned the tables on the RBS Consortium was short lived as
RBS made a formal counter bid in July. ABN's management who had initially thrown
their weight behind the Barclays bid, which would have substantially left ABN intact,
now withdrew its support, calling for a "level-playing field" between both bidders but
Groenink still managed to recommend to his shareholders that they reject the
consortium bid. Sir Fred, after being repeatedly rebuffed in his requests to meet the
ABN management, said, "I don't think we are going to get a level playing field, just
a playing field." Groenink was subsequently removed from the bidding process.

By now, late July, Varley knew he had a fight on his hands. He brought in two investors
to add a cash element to the deal, but even the might of the China Development Bank
and the Singaporean government investment fund Temasek were unable to boost the
bid sufficiently. Barclays' offer rose to €67.5 billion (£46.7 billion) with a 37 per cent cash
element. The result was an offer from Barclays that fell almost £7bn short of its rival.

In early August, a further blow landed as the global financial markets came under
increasing pressure, sending Barclays' shares critically downwards.