RBS Consortium Ups the Anty for ABN & LaSalle Bank: The Spin On Benefits, Costs Savings & Risks (Part 2)

Implications: Key Implications: On May 29, 2007, the Consortium provided clarification on their hostile bid for ABN & LaSalle Bank and confirmed their financing is in place. RBS will pay $36.59 billion; Fortis will contribute $32.29 billion and Santander comes up the rear with $26.77 billion, to seal the finances needed to trump Barclays bid of $91 billion and ups the stakes bidding $95.6 billion for ABN with LaSalle. RBS offered $24.5 billion for LaSalle, outbidding Bank of America's $21 billion bid, however, ABN rejected the offer and the case landed up in the Dutch court, who ruled that ABN should put the BOFA offer before its shareholders for a vote and froze the sale of LaSalle Bank to BOFA. The Dutch court will rule on the LaSalle sale to BOFA in July 2007. The Consortium portends it will increase ABN's profits to $1.64 billion, and cut costs by $5.7 billion by the end of 2010 and that its deal offers a 50% better return than the Barclays deal and is 10% above Barclays "all stock" offer.

Analysis: Comments/Perspective:
The Consortium, a.k.a. 'the Bank," to be known as RFS Holdings if their hostile takeover bid of ABN + LaSalle is successful, has layed out "best case" scenarios of its offer for ABN & LaSalle Bank, to woo Dutch regulators, ABN, Fortis's, RBS's and Santander's shareholders, stakeholders and convince all parties not only in words and deeds, but in cash and stocks to win the coveted ABN & LaSalle global operations.  RBS will take the lead role in compliance and Fortis and Santander will be backup quarterbacks and RBS's CEO anticipates a 13.5% return on capital, which is above its own cost of capital.

1.  When the Consortium was formed each entity made their requests for which parts of ABN each would acquire once they dismantle ABN:  Fortis wants the global Retail Banking, Asset Management and Private Bank Units of ABN to create a "Benelux" leader in the Netherlands;  Santander  wants ABN's Latin America Retail & Commercial Banking Units, excluding ABN's Wholesale clients outside of Brazil and RBS wants North America, which  = LaSalle Bank, ABN's Global clients and Wholesale Business globally in Brazil, Asia, Europe and Antonveneta.  However, when the Consortium layed out their plans to score a "touchdown" with the acquisition of ABN Amro, they didn't take into account that "Bank of America" would be in the "red zone" waiting/attempting to block their "touchdown" acquisition of ABN's "LaSalle Bank

2.  The Consortium contends it will strengthen ABN and not expose it, its capital or its clients to any additional risks and this sounds good, however, consider that the Consortium will need to receive regulatory approval from 53 countries in which ABN 's operations exist and also consider the employee attrition rate may be as high as 9-10% and the fact that some of ABN's top executives have already jumped ship and lastly, consider a "friendly" takeover/merger compared to a "hostile" takeover and the logistical challenges of merging systems, cultures, employees, business models and the "egos" of three giants from RBS, Fortis & Santander. 

3.  Barclays numbers are more realistic because they're on the inside looking out and a portion of those 23,000+ employees who will loose their jobs may be employees ABN & Barclays wants to get off their payrolls anyway and the Consortium is on the outside looking in and potentially making "best case" projections of employee layoffs, profits and costs savings.  However, the Consortium does have a good historical record of integrating acquisitions and turing a profit and so in the final analysis, the question remains which offer provides more value and the least amount of risks for shareholders, stakeholders and employees of ABN, RBS, Fortis & Santander?

Stay tuned for Part 3 of this saga as I share more insight into the ABN, Barclays + Bank of America combination and/or a possible deal with the Consortium & BOFA and attempt to peel back LaSalle Bank and which parts Bank of America may want and which parts of LaSalle the Consortium may want and whether the two parties can reach an agreement that may be amicable to both parties.