Barclays, ABN Amro Agree to Merge

LONDON ~ British bank Barclays outlined specific plans Tuesday for a merger with Dutch peer ABN Amro, but stopped short of announcing a formal takeover offer for the company.

Barclays gave details of a number of points the companies had agreed on, but did not provide any financial information and stressed that discussions with ABN were “at an early and exploratory stage.”

Also on Tuesday, investment fund TCI, an ABN shareholder, tried to spark a bidding war for the Dutch lender, inviting other banks to come forward with offers.

Under the terms agreed by Barclays and ABN Amro, the new group would have its main stock market listing in London, with headquarters and a secondary listing in Amsterdam.

It would have a single management board, with the first chairman nominated by ABN Amro and the chief executive named by Barclays.

The statement from Barclays added that the parties had begun talks with British, Dutch and other relevant regulators to make the Dutch Central Bank the lead regulator for their combined operations.

Prospects of a bid pushed up shares in both groups, which late Monday had first revealed that they were in “exclusive” talks to form the second-biggest bank in Europe and Britain after HSBC.

ABN shares closed with a gain of 3.54 percent at 31 euros in Amsterdam while in London, Barclays jumped 3.69 percent to finish at 702 pence.

A deal would create the world’s sixth-biggest bank at valuations when trading closed on Monday, capitalised at 162 billion dollars (123 billion euros).

Barclays wants to create a vast global giant with complementary banking interests around the world. But London-based TCI, which has a 1.0 percent stake in ABN Amro, wants the Dutch bank broken up to generate profits for investors.

TCI said in a brief statement on Tuesday that it was “encouraged” by the preliminary talks with Barclays.

But it also said: “We hope that the exclusivity granted to Barclays PLC will not prevent the board of ABN Amro from employing a process that considers bids by other credible institutions in order to produce the best result for shareholders.”

ABN Amro is the biggest bank in the Netherlands. A bid by Barclays would make strategic sense by enabling it to expand further across Asian and US markets, London-based analysts said.

The tie-up was also viewed as being positive for ABN Amro because of the break-up demands by TCI and felow British group Toscafund, which want management to sell assets separately to hand more cash to shareholders.

Barclays is the third-biggest bank in Britain with interests also in Europe, Asia, the United States, the Middle East and Africa.

ABN Amro has also expanded into emerging markets in Asia and has interests in Canada, Italy, Mexico and the United States. It has 4,500 branches in 53 countries.

The combined enterprise would have 47 million clients and employ 220,000 people in 50 countries.

“Broadly speaking, the two groups complement each other strategically, both in terms of geographical distribution and business mix,” said Panmure Gordon analyst Sandy Chen.

Moody’s Investors Service gave an upbeat assessment of the merger deal, saying that Barclays would gain a “significant” presence in the US retail market, besides creating a strong retail franchise across some major European markets.

“Moody’s noted that on the upside the potential link-up with ABN Amro would give Barclays the significant presence in the US retail market, via ABN Amro’s LaSalle Bank, which it currently lacked,” Moody’s said in a note to clients.

The note added: “The link up would also give Barclays more exposure to developing markets including Brazil where ABN Amro’s Brazilian operation – comprising Banco Real and including Banco Sudameris – plays a key role in the bank’s retail strategy.”

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