Barclays Bank has drafted a contingency plan to add a cash sweetener to its all-stock offer for Dutch banking giant ABN Amro, according to a report in the Financial Times. Barclays' offer of €65 billion was accepted by ABN, but a rival consortium led by the Royal Bank of Scotland has since bid €71.4 billion. The consortium's bid is on hold pending resolution of a dispute with Bank of America over ABN's U.S. asset LaSalle Bank, which the consortium wants, but BoA has already agreed to buy from ABN for $21 billion. When that dispute is resolved, Barclays will make a final decision about the sweetener. The Financial Times says Barclays is considering reducing the number of shares it was going to issue for ABN and replacing them with cash. Also, Barclays and ABN had planned to return €12 billion to shareholders through a buyback following the merger. Barclays could pay a portion of that cash directly to the shareholders by including it in the bid. The prospect of a sweetener is expected to upset some major shareholders of Barclays, who are apprehensive about a costly bidding war. The cash element, however, is expected to appeal to those who favored the RBS offer in part because it contained a cash component.
Sources: Financial Times, Reuters
Commentary: Atticus Fund to Barclays: Drop Your Bid for ABN Amro • RBS Consortium Formalizes Bid for ABN • Barclays Approached by Suitors for ABN Amro's Banco Real
Stocks/ETFs to watch: ABN Amro Holding N.V. (ABN), Barclays PLC (NYSE:BCS), Royal Bank of Scotland Group plc [ADR] (RBSPY), Fortis NV [ADR] (FORSY), Bank of America Corp. (NYSE:BAC). ETFs: First Trust Morningstar Div Leaders Idx (NYSEARCA:FDL), PowerShares Intl Dividend Achievers (NASDAQ:PID), iShares MSCI Netherlands Index (NYSEARCA:EWN)
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