ABN Amro

  • 01 Oct 2008 at 8:50 AM
  • ABN Amro

Premium Disequilibrium

I’m sure you can imagine exactly what would happen if State Farm suddenly decided that they would cover wind, water/flood and fire on every homeowner’s policy that, up to this point, had excluded recovery in these categories. Since State Farm had been carefully collecting actuary data and setting rates (in those states that didn’t impose strict price controls on residential insurance premiums) to extract their fairly thin margins, a sudden spike in expected payouts would require pretty drastic action.
Because a large portion of returns to insurance come from re-investment of collected premiums, insurance entities are incentivized to minimize required reserves and put the rest “to work.” A sudden increase in potential claims liabilities is not an easy thing to adjust to. Combining that with a period in which the rate of new claims is more than likely to spike, this would likely be, at least in the world of commercial insurance, fatal. So if the FDIC is suddenly required to assume substantial new liabilities after having for years collected premiums that would be insufficient to cover even the regular default rate, well that’s not good. Absent rather serious mis-management at the FDIC (we could realistically hope for this, actually) someone is probably going to have to inject a serious hunk of capital to keep the entity solvent.
Congress, White House Weigh Increase in Deposit Insurance [Wall Street Journal]

bankdavidbledin.jpgBarclays gave up its six-month battle to buy ABN Amro Holdings NV today after too few investors agreed to back the bid. The withdrawal clears the way and more or less rolls out a red carpet for Royal Bank of Scotland Group Plc, with Banco Santander and Fortis, to complete the biggest banking takeover ever. Barclays, which bid documents show had been working on creating the world’s sixth biggest bank for several years, is apparently unconcerned about being a potential target itself. Chief Executive Officer John Varley claimed to have full “confidence” in “an independent future” for the company.
And since no one posed an actual question regarding the difference in size between the two bids at the increasingly irrelevant—as far as the ABN Amro deal goes—British bank, Varley asked (and answered) one himself: “Do I think they’ve overpaid? My answer to that is yes. It is impossible to think that ABN has not been affected in terms of intrinsic value. The explicit purpose of us having a share-based offer was to ensure that we did not overpay…We were not prepared to purse victory at any price.” And when you put it like that, it’s *almost* as though they *were* victorious, isn’t it? (Of course, analysts said Varley’s comment might have bit a “little revisionist,” considering that Barclays, you know, was never actually able to get the cash together in order to take on the consortium’s offer but whatever–details. Let him have this one thing.)
Barclays boss says RBS has overpaid for ABN [Telegraph]

  • 06 Aug 2007 at 12:13 PM
  • ABN Amro

Barclays Categorically Refuses To Bring More To The Table

barclayseagle.gifBarclays formally launched its 65 billion euro ($89 billion) bid for ABN Amro today. The British bank offered 2.13 ordinary shares and 13.15 euros per share for each ordinary share of the Amsterdam-based bank, the soaring eagles said in a statement today, and the acceptance period runs from tomorrow until October 4. The bid, as the ABN Amro aficionados in the audience well know, is part of Barclays’ attempt to beat a takeover by a Royal Bank of Scotland-captained team of RBS, Banco Santander SA, and Fortis (who just this morning won initial shareholder approval for the deal).
Let’s discuss that rival proposition for a second. The consortium is offering 71 billion euros (of which about 93% is in cash) to Barclays’ 65. I’ll say it again, for the Rain Men in the group—71 versus 65. On July 30, ABN withdrew its recommendation for the Barclays bid, rocket-scientifically noting that it’s inferior to the Royal Bank’s offer. But the very next day, its chief executive, Rijkman Groenink, said “We continue to support the Barclays offer because we believe overall it is to the benefit of shareholders and stakeholders,” and noted that the Dutch bank would probably formally recommend it to shareholders later. They like Barclays, they want Barclays, they just want more money from Barclays, or at least something on par with what the Royal Bank is offering. I get that, you get that, why doesn’t Barclays, who just came up with an offer of 65 billion euros (not >71 billion euros) get that? They’ve been told by ABN Amro, “We prefer you, just bring up those numbers and we’ll endorse it,” but for some reason are all “Nah. We’re good.” They’ve been told “71” and they’re saying “No. 65.”
Maybe it’s because it’s Monday, maybe it’s because some of us have a gaping hole in our foot from stepping on the prong of an errant belt buckle Sunday morning, but I’m flat-out asking you to either confirm that this is a matter of Barclays not getting the embarrassingly overt message or me not getting what the hell is going on (“they’re playing hardball” is not an acceptable answer unless you elaborate, btw). You were already planning on trying to correct/humiliate me in the comments section for failing to understand the inner-workings of this deal (other than the SS implications), or for an improperly-placed apostrophe,* anyway, and now you have my blessing.
Earlier: ABN Amro Playing Horrible Game of Hard-To-Get With Barclays
Barclays launches $89 bln ABN takeover offer [Reuters]
Barclays Makes Formal Offer to Investors for ABN Amro [Bloomberg]
Fortis shareholders give initial OK to ABN deal [MarketWatch]

  • 31 Jul 2007 at 12:13 PM
  • ABN Amro

ABN Amro Playing Horrible Game of Hard-To-Get With Barclays

barclayseagle.gifABN Amro’s board decided over the weekend to withdraw its formal recommendation for a bid by Barclays, but it was only half-serious, and they were winking at the time (though that may have just been an involuntary spasm resulting from getting grapefruit in their eyes, which stings quite badly). ABN’s chief executive Rijkman Groenink said today that he supports the offer by the British bank and may formally recommend it to shareholders later, just not now, even though he sort of just did.
Groenick commented that “We continue to support the Barclays offer because we believe overall it is to the benefit of shareholders and stakeholders,” and the ABN-A board “still believes in the strategic rationale of the Barclays bid,” but they’re still “neutral.” So “neutral,” in fact, that they “acknowledged”—yes “acknowledged” numbers—that the 38.40 euros/ABN Amro share being offered by rival bidder Royal Bank of Scotland-Fortis Group of Belgium-Banco Santander Central Hispano is “higher” than Barclay’s proposed 35.73 euros/share. Because they’re “neutral.”
ABN’s Chief Expresses Support for Barclays’s Bid [WSJ]
Board to Remain Neutral in Bids for Dutch Bank [NYT]

  • 20 Jun 2007 at 9:30 AM
  • ABN Amro

Barclays Eagle On Endangered Species List

barclayseagle.gifIntent on making its bid for ABN Amro a success, Barclays is claiming to be seriously considering dropping its eagle logo, over concerns by ABN Amro that the large bird of prey may remind clients of the Nazi regime. The insignia, dating back 300 years, has been redesigned several times, to what some people believe now resembles the German eagle holding a swastika used as a symbol by the Nazis, two people close to both banks (Senior Anti-Anti-Semitism/Swag Correspondents) told the Times. The British bank would apparently switch to ABN Amro’s green and yellow shield, when/if the attempted acquisition is successful. (If it’s not, Heil Hitler, and viva that eagle).
Barclays May Drop Symbol [New York Times]

The Royal Bank of Scotland got serious in its attempt to awkwardly cut in on the marriage dance of ABN Amro and Barclays Bank today, submitting a $96.4 billion hostile unsolicited takeover offer today and a $24.5 billion offer for LaSalle, its Chicago-based banking unit. And ABN remained adamant in its refusal to take RBS for a swing across the dance floor.
The RBS offers top the deals ABN already has in the works to sell LaSalle to the Bank of America for $21 billion and everything else to Barclays for $87.1 billion. ABN said it would submit both offers to shareholders without endorsing them—in other words, it rejected RBS’s advances. Although the offers were higher, it said that the conditions attached to both offers and uncertainty about financing rendered both “not superior” to the Barclays and Bank of America bids.

Read more »

  • 04 May 2007 at 12:34 PM
  • ABN Amro

ABN Amro Litigation: Now Enter Bank of America

lasalle_bank.jpgMaybe we should start a list of who is not suing ABN Amro. This morning Bank of America filed a lawsuit seeking a court order barring ABN from selling it’s Chicago-based LaSalle unit to any other potential buyer or even from negotiating with anyone else, the Wall Street Journal reports.
The Journal explains how this fits in with yesterday’s ruling by a Dutch court halting the sale of La Salle to Bank of America:

The suit follows a ruling Thursday by a Dutch court, ordering ABN to halt the sale of LaSalle until shareholders can vote on it. ABN agreed to the sale to buttress its agreement to be taken over by Britain’s Barclays PLC for $89.9 billion in stock, in what would be the world’s largest banking deal.
The Dutch court’s ruling could benefit a consortium led by Royal Bank of Scotland Group PLC, which is planning to make a competing bid for ABN as well as a rival bid for LaSalle, a key asset that RBC wants.

In addition to seeking an injunction against ABN, the suit claims monetary damages.
A legal expert we spoke with (who requested we not use his name since we won’t pay his fees) said that ABN might welcome the Bank of America suit since it could relieve LaSalle of the duty to keep negotiating with other buyers.
Bank of America Sues ABN Amro [Wall Street Journal]