The Acquisition of ABN AMRO (A)
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Case Code: BSTR345 Case Length: 20 Pages Period: 2007 Pub Date: 2009 Teaching Note: Not Available |
Price: Rs.300 Organization: ABN AMRO, Royal Bank of Scotland, Fortis, Banco Santander Central Hispano Industry: Banking, Financial Services Countries: UK, Belgium, Spain, The Netherlands Themes: Mergers, Acquisitions, Strategic Alliances |
Abstract Case Intro 1 Case Intro 2 Excerpts
"Once the celebration is over, the real challenges involved in this acquisition will have to be faced. Chopping a large international bank like ABN AMRO... will not be an easy task, especially from an operational point of view."
- Axel Pierron, Analyst, Celent Financial Consultants, in October 2007.
"The Royal Bank-led offer is a very expensive transaction. The risk-reward doesn't add up."
- Robert Talbut, Chief Investment Officer, Royal London Asset Management, in October 2007.
"The acquisition of the ABN AMRO businesses remains compelling from a financial point of view, as evidenced by the fact that it produces essentially the same earnings enhancement for the group, despite the smaller size of the transaction."
- Fred Goodwin, Chief Executive Officer, RBS Group, in July 2007.
Introduction
On October 10, 2007, Royal Bank of Scotland (RBS) led consortium consisting of RBS, Fortis of Belgium and Banco Santander Central Hispano SA of Spain (Santander) created history by acquiring Dutch banking giant ABN AMRO for US$ 100 billion. The consortium paid US$ 51.55 per share of ABN AMRO, about 13 percent more as compared to the rival Barclays' offer. This was one of the largest acquisitions in the history of the global banking industry. The consortium agreed to pay 93 percent of the acquisition amount in cash and the remaining seven percent through RBS shares.
The consortium outbid Barclays, which had offered US$ 91.2 billion mostly in the form of Barclays' shares. Initially, the management of ABN AMRO favored Barclays as it promised to keep the bank intact, while the consortium had announced that it would break ABN AMRO up into three parts to suit the requirements of the three partners. However, from the shareholders' point of view, the offer from RBS consortium was more attractive, as it offered them a higher value and 93 percent of the amount in cash. The consortium announced that it would make the payment to the shareholders on October 17, 2007.
After the completion of the acquisition, RBS was expected to get access to ABN AMRO's global client base, its global wholesale banking business excluding those in Brazil and private banking business of Banca Antonveneta SpA. Santander would get ABN AMRO's Brazilian and Italian subsidiaries, while Fortis would get ABN AMRO's business operations in Belgium, Luxemburg and Netherlands along with the asset management business of ABN AMRO. The acquisition was expected to strengthen all the three consortium banks in their own markets and open up new segments to accelerate their growth. It would make RBS the fifth largest bank in terms of assets in the US. In wholesale client business and corporate banking, it would be #1 in the UK and Europe, and it would be fifth in the US and also in Asia excluding Japan, in terms of number of clients...
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