Page 429 - The Case Lab Book

"At first sight the synergy targets appear challenging, more comparable to an in-market deal than
cross-border. However, it should be remembered how inefficient ABN is." On the balance of
prospects, he recommends buying RBS shares.

Younus of NCB said that though Barclays had saved itself from a pricey, risky acquisition, there
are concerns that it could be vulnerable to a takeover bid itself. He added, however, that it was
unlikely that such a bid would materialize, and at the most there would be a rise in strategic
investments by Asian banks.

Some analysts have said Barclays may have to seek another partner or become a takeover target
itself.

"Barclays is likely to wait for a while before it looks again to acquire another large bank, but
eventually it will have to do so in order to compete in the industrialized banking market,"

(What would the ABN shareholders want shares on a falling market or cash?)

April 26: ABN shareholders approve a nonbinding motion by TCI resolving that the company should split itself — a
clear rebuke to management for preferring Barclays.

ABN’s outsourcing and other efficiency/productivity initiatives of the previous years
weren't enough to accelerate earnings growth or produce a higher share price. and
keep the capital-appreciation hungry hedge fund investors at bay.

RBS investors have seen the bank's shares lose more than 20 per cent since March. Even after a
bounce in recent days, RBS is now worth about 75 billion, only a little more than the 70 billion
valuation of ABN Amro implied by the consortium's offer.

Sir Fred Goodwin, the chief executive, must now persuade investors that the price paid was right,
and that the headache of unravelling ABN is justified by the cost savings and revenue benefits
they will achieve - which total some 1.8 billion, equivalent to nearly three times the current pre-
tax profits of the businesses it is acquiring.

Investing against the cycle is often a recipe for success. But would RBS have launched this deal
all those months ago if it knew then what it knows now about the fragility of confidence among
providers of credit?