Page 427 - The Case Lab Book

Issue 2

Did the recent credit crunch have an effect on the price of the bids?

The collapse in Barclays' share price undermined its bid, leaving it exposed to the consortium's
higher cash-based offer.

Barclays is keen to see its share price go higher over the next month as shareholders deliberate
between its bid and that of a banking consortium led by Royal Bank of Scotland (other-otc:
RBSPF - news - people ), whose mostly cash offer is worth 71 billion euros ($98 billion).

"While the Barclays merger proposal was understandable, realistically implementable despite
being expensive, the consortium chopping of ABN Amro might eventually become a structural
nightmare."

The value of Barclays' offer fell with its share price this summer amid widespread turmoil in
the banking sector, leaving it at a 10bn euro disadvantage to the RBS's mostly cash offer.

In spite of the political sensitivity surrounding a three-way carve-up of a Dutch corporate icon, as opposed to the
creation of an enlarged Dutch-headquartered bank which would have resulted from the success of Barclays' bid, ABN
investors were never going to knock back a much higher bid which was largely in cash. Especially for the hedge
funds, which hiked their stakes in ABN after it found itself in play, cash is king.

Issue 3

The loss of the bid has been both good and bad news for Barclays. On the one hand it cuts short
the growth it hoped to achieve through the acquisition, including in emerging markets such as
Brazil. The very public airing of differences between shareholders and management has also hurt
the reputation of Barclays' Chief Executive John Varley.

Barclays in having to walk away just clutching a cheque for the break up fee, may yet prove a
blessing in disguise. If Mr Varley has some thinking to do about his vision for the bank without
ABN, at least he, unlike Sir Fred, will be able to do so without any pins in his eyes.

Of greater significance to Barclays' future is its deal with China Development Bank and
Temasek, which manages the Singapore government's investment fund. By investing in the
British bank they provided the ammunition that allowed Barclays to sweeten its offer for ABN.
The Chinese, in particular, will give Barclays an inroad to emerging markets.

Varley rejects the comparison with BoS which he says was a different business at a different
time and will console himself with a €200m break fee from ABN Amro. Varley has claimed that