Barclays Invites Investors From Asia with Deep Pockets To Support Their Bid for ABN

Implications: After considering all of its options Barclays made a strategic decision to seek investors from Asia to help fund its bid for ABN and to add a "cash component" to the bid of 37% or $34.3 billion and the remaining $59.03 billion will be in Barclays shares, raising their bid to $93.3 billion from $91 billion, but it still falls short of the Consortium's $98 billion bid. China Development Bank plans to invest an additional $10.5 billion if Barclays succeeds in its bid and Temasek has pledged an additional $3.0 billion if Barclays is successful in its bid. Barclays is now touting its synergies with ABN and cost savings of $1 billion in 2008 and $3.0 billion in 2009, as well as two formidable players in Asia which could be used as a spring board for expansion in Asia. Barclays has indicated it plans to expand its Barclays Cap business by 20-30% annually in Asia and in the past both ABN & Barclays has made missteps in the region and these new allies may be a great source of support.

Analysis: Comments/Perspective:

In a chess match and battle for ABN's assets and market share that began back in April 2007 and may prove to be the deal of the year and a summer to remember, Barclays may be the cat that ate the canary at least this week when it announced on 7.23.07 that it has gained two new allies and investors from Asia. Since May 2007, Barclays began talking with China Development Bank and Temasek to offer a stake in Barclays and encourage them to support its bid for ABN with an infusion of cash and future investments should Barclays win the bid for ABN. The Consortium struck first after they lost in their bid for LaSalle Bank after the Dutch Court ruled the sale was valid and Bank of America could acquire LaSalle Bank, and raised the cash portion of their bid from 79% to 93% and put pressure on Barclays Varley to up the anty or concede.

1. Not to be outdone, Barclays received clearance from the European Bank and other regulators last week and reached out to key shareholders to inform them of their plans to go forward with an investment by China Development Bank and Temasek for a stake in Barclays Bank in turn for an initial investment of cash from both investors, in their attempt to win the bid for ABN and add a cash component to their bid to make it more attractive when compared to the Consortium's bid

2.  China Development Bank will own a 7.7% stake in Barclays and may provide Barclays revenue opportunities by allowing Barclays Cap to distribute its commodities products in China and China Development Bank may play a key role in developing a commodities hedging market for the Chinese Government with the help of Barclays Cap

With this new infusion of cash and the potential revenue opportunities in the future for Barclays and even greater synergies with a successful bid for ABN, Barclays may be more aligned with the Consortium's bid and may sway the shareholders of ABN and Barclays to approve the Barclays bid over the Consortium's bid, which still has to raise $77 billion of their proposed $98 billion bid for ABN. It's still early in the game and after Fortis's shareholder vote on August 6, 2007, we may have a clearer picture of who wins the ABN karat.