Will ABN Be Neutral to Both Bids & Let Its Shareholders Decide Which Bid to Approve?

Implications: Early reports suggest ABN's Boards mulled over Barclays bid of $93 billion of mostly stock and the Consortium's bid for $98 billion with 93% in cash and may have decided to withdraw support for the Barclays bid and may stand neutral on making recommendations to its shareholders on either bid. Barclays new offer last week came with a pre-condition that ABN would support its bid or Barclays could waive the pre-condition if it isn't satisfied and Barclays may decide not to pull out of the bidding war although ABN may withdraw support and revise its requirements or hold out to see if its share price will improve and pull them closer to the Consortium's bid. On July 27, 2007, Santander received shareholder approval and $12.2 billion in equity, including a capital increase of $5.46 billion and a convertible bond issue of $6.8 billion, as part of the funding for its portion of the bid. Santander also sold its Latin American Pension Operations to ING on 7.27.07, for $1.3 billion. 

Analysis: Comments/Perspective:

Barclays may be fighting an uphill battle as early reports indicate ABN's Boards may withdraw support for Barclays bid on 7.30.07. ABN's Boards may still favor the Barclays bid, however, almost 50% of ABN's shares are owned by hedge funds who may favor the mostly cash bid by the Consortium, which is also higher than the Barclays bid. In a twist to this story, Barclays may have been approached by unnamed hedge funds to take a stake in Fortis before their shareholder vote on 8.6.07, so that Barclays can vote against Fortis's rights issue of $17.76 billion to fund its portion of the bid.

1.  Fortis may be in a venerable position as its shareholder vote draws near. Hedge funds may be building stakes in Fortis in an attempt to block the Consortium's deal and to force Fortis to put itself up for sale.  Fortis will be asking its Board to fund approximately one-third of its total value
for its portion of the bid. Should hedge funds run interference at the shareholder vote on 8.6.07, Fortis may run the risk of not receiving approval from its shareholders

2.  The verdict may still be out on Barclays and whether it will forge ahead in the bidding war. Barclays may still have some cash stashed away in its coffers and may be playing its hand close to the vest, to wait and determine if all shareholders of the Consortium will approve their portion of the total bid and see how its stock performs before it pulls out additional financing to win the bid.  It may not be a coincidence that Barclays announced it has two Asian investors supporting its bid for an ABN takeover and both investors have more liquidity to offer up, which could increase their stake in Barclays