M&A: ABN AMRO battle joined

The stage was set for a drama when the RBS - Fortis - Santander consortium applied to a Dutch Court to block the sale of ABN AMRO's US La Salle unit to Bank of America. The Court ordered that, as the sale was taking place in the context of a takeover, and as a condition of that takeover, ABN AMRO must put the question of the sale to the shareholders, as a part of the takeover consideration.

Both ABN AMRO and BofA have appealed, independently, to the Dutch Court for the injunction to be overturned.

Barclays wants the sale to go ahead because, in effect, BofA is sponsoring part of its offer by purchasing that unit in advance of the takeover. But RBS-Fortis-Santander - which has already said it wants to buy the group so as to split it up, is now saying that La Salle is an integral part of its strategy.

ABN AMRO is in a cleft stick. It prefers the Barclays bid because the core business will remain intact. Under the RBS bid, the business will be split up. And, including the sale of La Salle, it's all in cash. But the RBS deal is now for USD5 milliard more, and the cash element has been increased from 70% to 79% with the remainder in a complex mix of stock in the consortium companies. That element has been a sticking point for future returns for investors depend on the performance of not only the reshaped ABN AMRO but also on the performance of three very different companies.

The markets don't think much of the Consortium bid, even in its revised state: Barclays is up and RBS is down by similar amounts, creating a differential of more than 10% in comparative movements.

This isn't over yet - but the question is now whether the parties will push each other to produce the first USD100 milliard takeover in corporate history. With the latest RBS offer standing at 96.5 milliard, the next logigal breakpoint is just over the magic number. Whether we are now in the realms of finance, public relations or bravado is not at all clear. And the biggest unknown, at present, is currency fluctuations. This is a deal that needs pounds, dollars and euro to make it work, and there is considerable friction between the three currencies. Whoever wins, the price will not be as fixed as they would like.

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The Chief Officers' Network is to hold "Mergers and Acquisitions in the Financial Services Sector" in Hong Kong in September 2007. Keep an eye on "Events" for details.