Page 417 - The Case Lab Book

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On the 8 October the consortium announced that its offer for ABN had been accepted
by investors owning 86% of the Dutch bank. This was well above the 80% minimum
acceptance level which the consortium had made a condition of its break-up bid.

The three consortium members now intend carving up the Dutch bank between them in
what may prove to be a highly complicated process that could lead to 20,000 European
banking job cuts.

The Consortium

The takeover fight, which began in March, lasted
through the fire sale of ABN's U.S. arm, a flurry of
lawsuits, legal challenges and turmoil in global credit
markets.

RBS forecast cost savings of 1.8 billion (£1.24 billion),
equivalent to nearly three times the current pre-tax
profits of the businesses it is acquiring, by 2010. That compares with estimated savings
of 1.15 billion at Fortis and 860m at Santander. The jury however, will remain out until
Sir Fred has proved that the integration has gone smoothly. Over the previous six
months RBS’ share-price fell by 15 per cent, and more than 20 per cent since it peaked
in. Furthermore, the bid price never changed, so this bid had been won at the expense
of shareholder value as RBS paid top price, 32 times historic earnings, for assets that
had gone down significantly in value since the bid's launch.

Banco Santander:

Santander takes some of ABN's most attractive
assets, including the Brazilian division, Banco
Real and the Italian division Anton Veneta. The
Latin American wholesale clients however, will be transferred to RBS, apart from Brazil.

Fortis:
Fortis was seen as the weakest link in the consortium as

questions were raised over its ability to arrange financing for its part of the deal. Also
fears over whether it would receive antitrust approval from the European Union were
voiced. Fortis responded that EU objections "related to the market for small and
medium-sized enterprises in the Netherlands," and it had presented "remedies" that it
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expected would allow the deal to go through. By the 3 of October both of these queries
were answered and objections removed thereby strengthening the consortium’s bid.