Summary
The RBS Consortium won the hostile bid for ABN with 86% of ABN's shareholders voting in favor of the Consortium's bid valued at $101.5 billion, trumping Barclays $89 billion bid. Barclays threw in the towel after ABN's shareholders voted in favor of the Consortium's bid and Barclays will seek the $281 million breakup fee from ABN. Barclays plans to move forward with its share buy back program to raise a maximum of $2.17 billion in 2007, to speed up growth due to losing its bid for ABN. Barclays experienced a share price slump in August when its share price dropped by as much as 15%, which reduced the value of its offer and Barclays was hurt by fears a collapse of the U.S. mortgage market may cause losses at its investment banking arm, BarCap and Barclays eventually fell out of contention with the Consortium's bid. The rival bidding for ABN began after activist hedge fund TCI raised concerns over ABN's share value, which opened the door for the Consortium's takeover of ABN.
Analysis
The battle for ABN began at a time when M&A deals were running at a record pace and ended once takeovers slowed amidst the turmoil in the credit markets and over concerns that economic growth may dwindle. After a bitter battle amongst Barclays and the Consortium and a side deal with Bank of America which led to the sale of ABN's LaSalle Bank in an attempt to derail the Consortium's rival bid for ABN, the Consortium declared victory after ABN's shareholders showed their support for the Consortium's bid with a 86% vote of approval and dashed any chances for Barclays to become the 5th largest bank in the world, and trumped ABN's Board, who wanted to keep ABN in tact and not divide its assets.
1. If Barclays had acquired ABN, Barclays's retail banking revenue would have doubled and given the bank new opportunities in markets stretching from Brazil to India. Barclays may need to expand its geographical reach and customer base to avoid the potential of becoming a target for takeover since they failed to seal the deal with ABN. Barclays may look for acquisitions in the future to boost growth, however, growth may slowdown as a result of a decline in market conditions and due to its over reliance on its investment arm, BarCap
2. The Consortium is optimistically cautious about winning the bid for ABN because the deal won't be finalized until after Fortis raises the remaining $17.78 billion for its portion of the bid, and Fortis launched its rights issue to raise its remaining portion of the bid on 9.25.07 and the rights issue will conclude on 10.09.07 and the Consortium plans to close the deal by 10.12.07
The Consortium will move forward with dividing ABN's spoils and integrating ABN's vast operations to focus on cost synergies, expanding market share and revenue growth over the next 2-3 years. The bidding war for ABN was a bumpy ride and one that we may want to take again.
