ABN Amro's 1st Quarter Profits Rise, Despite Takeover Talks, A DOJ Investigation & Fines of Up to $500 Million

Implications: Key Implications:

Despite a possible hostile takeover bid by a Consortium comprised of RBS, Santander & Fortis, a $498 million fine by the U.S. DOJ for allegedly violating anti-money laundering guidelines, a revolt by 2/3rds of its largest shareholders and its friendly acquisition by Barclays, who is in settlement talks with the SEC for alleged insider trading violations and Bank of America anxiously awaiting to acquire its U.S. operations of LaSalle Bank for $21 billion, ABN's 1st Quarter profits rose by 2.5% or $1.45 billion dollars (U.S.).

1.  ABN Amro is in the midst of heated takeover talks by RBS, Santander & Fortis, who is offering an unsolicited bid of $98.5 billion dollars, 70% in cash and the rest in stock, while Barclays is offering $91 billion with the guarantee that Barclays will keep the 183-year old bank in tact, while the Consortium plans to break up the bank and take the divisions they want and sell off the other divisions and purportedly offer more shareholder value to ABN's shareholders

2.  ABN has experienced solid growth across all regions and the  Consortium is interested in ABN's most profitable business units and RBS wants to expand its operations in the U.S., which is why they want LaSalle Bank, as well as ABN's Asian Division and Securities Unit, while Santander wants ABN's Brazilian and Italian Operations and Fortis wants ABN's European Operations and the Consortium wants ABN's profitable units in order to effectively compete against HSBC Holdings


Analysis: Comments/Perspective:

From 2000 - 2006, ABN's stock price has remained relatively stagnant and ABN's CEO, Rijkman Groenink hasn't met his own goal to bring ABN up to the Top 5 of their peer group based on return on equity, however, ABN operating expenses through FY 2006, increased at a rate greater than operating revenue and has led to over 2/3rds of ABN's shareholders voting in favor of breaking up ABN and giving the Consortium the same due diligence data ABN provided to Barclays, which may lead to a breakup of ABN and could potentially boost ABN's stock price and add more value for ABN shareholders. What began as a friendly acquisition of ABN by Barclays has quickly become a potential hostile takeover by the Consortium and is marred by investigations of ABN by the U.S. DOJ, Barclays by the SEC for alleged insider trading and resulting in ABN paying out approximately $500 million (U.S.) in fines, however, ABN's profits has sustained the current volatility and rose in 1st Quarter 2007.

1.  Thursday, May 3, 2007, will be a pivotal point in this either friendly acquisition (ABN + Barclays + BOFA) or a hostile takeover by the (Consortium of RBS, Santander & Fortis), when an Amsterdam court will either rule on behalf of a group of ABN shareholders to freeze the sale of ABN's LaSalle Bank to Bank of America and/or rule to allow the Consortium to go forward with its hostile takeover bid or thwart the Consortium's efforts and rule the sale of ABN's LaSalle Bank to BOFA as valid

2.  ABN's management have made their intentions clear from the beginning and have sought outside suitors (Bank of America) and now possibly Scotish Bank to keep ABN in tact, while ABN shareholders are crying "foul" and took their case all the way to the Amsterdam court and the Consortium is lining up their finances in the event they are granted approval to move forward with their hostile takeover bid and as the bid for ABN reaches almost $100 billion, ABN shareholders may be the winners in this bidding war, however, ABN's brand may be tarnished after the dust settles and it will be interesting to see if all of this M&A activity will result in higher profits in 2nd Quarter 2007 or whether ABN profits will decline