Barclays will raise its offer for ABN Amro to $93.1 billion, with help from two Asian financial partners, in the face of a rival bid led by the Royal Bank of Scotland, the British bank said Monday.
Barclays’ new 67.5 billion-euro offer includes 42.7 billion euros ($58.9 billion) in shares and 24.8 billion euros ($34.2 billion) in cash, or 35.73 euros ($49.32) per ABN Amro share, based on Barclays’ closing price Friday.
That compares with its own earlier all-share offer worth 33.86 euros ($46.74) and the RBS-led consortium bid of 38.40 euros ($53.01), which valued the bank at 71.1 billion euros ($97.8 billion).
Either takeover, if successful, would be the largest in the history of the financial industry.
“The latest installment in this major banking tug-of-war has yet again thrown into doubt the identity of the eventual winner,” said Richard Hunter, head of U.K. equities at Hargreaves Lansdown Stockbrokers. He said RBS still has the advantage due to its higher offer.
ABN Amro Holding NV said it a statement that it had received the offer and “welcomes the opportunity for shareholders to consider two competing proposals on a level playing field.”
Barclays PLC shares rose 2.7 percent to 732.5 pence ($15.07) on the London Stock Exchange. Royal Bank of Scotland PLC shares fell 0.3 percent to 608 pence ($12.50), increasing the value of Barclays’ bid slightly, and fractionally lowering that of RBS, which is more than 90 percent in cash.
ABN Amro shares rose 0.4 percent to 36.79 euros ($50.78) in Amsterdam trading Monday.
Barclays said it had struck a deal with China Development Bank and Temasek Holdings Ltd. of Singapore, whereby the pair will buy 3.6 billion euros ($5.0 billion) of new Barclays shares now, and an additional 9.8 billion euros ($13.5 billion) if the bid to buy ABN Amro is successful.
At the same time, the bank said it planned a 3.6 billion euros ($5 billion) share buyback to match the amount of its shares issue to the Asian investors.
“The most interesting part of its latest move is that it will potentially provide the existing ABN with a foothold in China — and the shareholders will need to take this into account when deciding which offer is best in the interests of the company,” Hunter said.
Barclays CEO John Varley said the banks alliance with a Chinese partner was smart strategy in any case, but the company’s larger aim was to make its offer more attractive to ABN shareholders than RBS’s.
“What we offer to ABN Amro shareholders is, in our view, significantly superior,” Varley said.
He and ABN Amro Chief Executive Officer Rijkman Groenink that the Barclays deal was preferable because it would combine forces.
“Ours is a build strategy, a growth strategy, it’s a strategy led by revenue growth, it’s not a strategy led by deconstruction,” Varley said.
The consortium led by RBS would cut up Barclays. Fortis NV of Belgium wants ABN’s Dutch operations, Banco Santander Central Hispano SA wants its Brazilian and Italian arms, and RBS wants the rest, including ABN’s investment banking arm.
The Barclays offer “is better in terms of its content, but it’s not good enough in terms of amount,” Groenink said.
“Hedge funds and speculators” likely hold 30 to 40 percent of ABN’s shares, he said. “They have only one interest and that’s in the highest offer, in cash, and today, please.”
Varley said it was likely a final bid.
“Why should we go beyond where we’re going today?” he said at a press conference in London. “I think that ABN Amro shareholders will recognize fully the value of what we’ve put in front of them.”
Barclays is to report first-half earnings on Aug. 2, but issued an unaudited trading update Monday. The British lender said income net of insurance claims in the six months through June 30 was 11.9 billion British pounds ($24.4 billion) up 9 percent, and pretax profit was 4.1 billion British pounds ($8.4 billion), up 11 percent from 3.7 billion British pounds ($7.59 billion).
ABN Amro’s board had still formally endorsed Barclays previous offer and praised the new bid in a statement Monday.
“The proposed strategic cooperation with China Development Bank further enhances the growth opportunities of the combined group in the attractive Asian market and can result in creation of additional long-term value for ABN AMRO shareholders,” it said.
The RBS offer period begins today and expires Oct. 5. Barclays said Monday it planned to issue its revised offer as a formal bid “as soon as possible,” but did not set a date.