RBS Consortium Could Lower Bid for ABN -- Times of London

The three-bank consortium led by the Royal Bank of Scotland might invoke a material adverse change [MAC] clause and lower its offer for Dutch bank ABN Amro, the Times of London reported Tuesday. The consortium has a €70 billion offer on the table for the bank. The paper noted that the consortium partners have not yet discussed invoking the clause, and the U.K. Takeover Panel has a history of ruling against it. Still, the credit crunch has made deals of this magnitude less appetizing, and the MAC clause is one means by which the consortium could attempt to back away from its bid. The clause allows a buyer to scale back an agreed price for a target or walk away completely if it can prove that there has been a material change in the value of the target. According to the Times, many companies and "virtually all the top investment banks" are discussing "invoking the MAC as a way of wriggling out of overpriced deals." Home Depot recently had to lower the price for its wholesale distribution business to $8.5 billion after agreeing to sell it for $10.3 billion. The MAC clause was invoked by both the underwriting banks and the private equity buyers to show that Home Depot had been materially adversely affected by the implosion of the sub-prime sector.

Sources: Times of London, MarketWatch
Commentary: RBS Consortium Adds to ABN Amro Stake • ABN Amro Plunges on Rumors Buyout May Fall Through • ABN Amro Acquisition: Too Many Chefs Wearing the I-Bank Advisor Hat
Stocks/ETFs to watch: ABN, RBSPY.PK, BCS, FORSY. Competitors: HBC, DB, UBS. ETFs: RKH, MOT

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