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Sunday Telegraph: McKillop warned: Don’t overpay for ABN

EXTRACT: One major Dutch institution is also attempting to block his appointment as a non–executive director of Royal Dutch Shell, which is due to be ratified at the oil giant’s annual meeting this week.

THE ARTICLE

By Iain Dey,
Last Updated: 12:39am BST 13/05/2007

Sir Tom McKillop, the chairman of Royal Bank of Scotland, has been warned of a potential shareholder revolt against the bank’s proposed £50bn break-up bid for ABN Amro, the Dutch bank.
  
Sir Tom McKillop: Legal complications look set to drag out the ABN bidding war
In meetings last week, at least four major institutions told McKillop that they would not tolerate RBS paying too high a price for ABN assets.

Shareholders have now demanded detailed evidence on the cost and revenue savings that could be extracted by RBS and its consortium partners, Fortis, the Belgian financial services group, and Santander, the Spanish banking giant.

The consortium is going head to head with Barclays, which has already agreed a deal with ABN that included a sale of the group’s US business to Bank of America.

One top 10 shareholder in RBS said: “We have had a number of conversations with Tom McKillop where we have made it clear that RBS must not get drawn into overpaying. There is a clear risk that they will do a deal at the wrong price. We want to see more detail on the transaction as soon as possible.”

A clutch of British-based fund managers stand to have a considerable say in the future of ABN. Institutions such as M&G, Scottish Widows, Stan-dard Life Investments, Insight, Morley and Legal & General control huge stakes in both Barclays and RBS. These institutions are concerned about the two British banks getting into a bidding war with each other. Shares in RBS have fallen by about 6 per cent since its interest in ABN was confirmed.

The RBS consortium has already offered to outbid Bank of America for LaSalle, ABN’s US business, although that offer has been rejected. An offer for the rest of ABN could be tabled as early as this week.

Merrill Lynch, the adviser to the consortium, is understood to have lined up a number of European and US banks to underwrite any offer. Fortis, considered the weak link in the consortium, is believed to have secured informal support from its investors for the huge rights issue it would have to launch to support its involvement in the bid. But the consortium may yet decide to walk away.

Legal complications look set to drag out the ABN bidding war for several months. It may now be September before ABN can hold a shareholder vote on the sale of LaSalle. Such a vote was demanded by a Dutch court.

A number of hedge funds are taking short positions on ABN’s shares, according to market sources, in expectation that the shares will fall before a deal can be done.

Rijkman Groenink, ABN Amro’s chief executive, is thought to be under pressure from members of his supervisory board following calls for his resignation from some investors who are unhappy with the handling of the sale.

One major Dutch institution is also attempting to block his appointment as a non–executive director of Royal Dutch Shell, which is due to be ratified at the oil giant’s annual meeting this week.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/05/13/cnabn13.xml

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