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The Guardian: RBS consortium says funds in place to buy Dutch bank

· Suitors say Merrill Lynch will underwrite £35bn
· ABN Amro chief pulls out from joining Shell board

Jill Treanor
Tuesday May 15, 2007

The chief executive of ABN Amro, the Dutch bank embroiled in the world’s biggest banking takeover, has rejected a seat on the board of oil company Shell to concentrate on the £49bn battle for the Netherlands’ second largest bank.

Rijkman Groenink’s name will be withdrawn from the agenda at the Anglo-Dutch oil group’s annual meeting today where protesters are expected to accuse the company of trying to influence Iraqi oil policy.

Mr Groenink decided to stand aside from the £70,000 a year part-time role as the Dutch bank called on the Royal Bank of Scotland-led consortium considering whether to disrupt an agreed £45bn deal with Barclays to make its intentions clear. He had also faced a potential protest vote by shareholders.

As private documents between Mr Groenink and Sir Fred Goodwin, the RBS chief executive, were published after demands from the Dutch regulators, ABN Amro insisted it was correct to reject a friendly approach from the consortium. It cites lack of information about how the consortium would raise the financing for the record-breaking deal and the conditions attached to the offer.
The deal was conditional upon the consortium’s $24.5bn (£12.4bn) offer for ABN Amro’s US bank LaSalle being accepted, requiring a $21.5bn agreement with Bank of America to be torn up.

But the consortium – which includes Spain’s Santander and Dutch-Belgian group Fortis – used the hundreds of pages of documents, which included letters and emails between the parties, to demonstrate that it had the financing and managerial expertise to complete the deal.

In a letter to Mr Groenink on May 3, the consortium insists that its offer to pay €38.40 (£26.20) a share will “not be subject to any financing condition”.

The consortium torments its target by saying that Merrill Lynch, the consortium’s investment banking adviser, had “received various other approaches from other major financial institutions, including some institutions currently advising you, wishing to participate in any fund raising we may do”.

This appeared to suggest that banks such as UBS and Morgan Stanley, which are advising ABN Amro, were keen to back the consortium although such suggestions were rejected last night.

In its correspondence with ABN Amro, the consortium insists that it wants to do a deal on a “cooperative basis” and discusses the possibility of key management jobs being based on “merit”.

It suggests that job cuts would be on the scale indicated by the Barclays-ABN Amro tie-up – some 23,600 – and largely come from within their own ranks. The three banks, which plan to carve up ABN Amro between them, insist that “Merrill Lynch undertakes to underwrite [guarantee]” the £35bn they need to raise in cash – largely through Fortis and Santander.

The three banks are still considering whether to make an offer for ABN Amro and will tell investors by May 27.

They may need to arrange new financing as previous attempts appear to have had a May 6 deadline. Until such a time, ABN Amro is likely to delay setting the date for a shareholder vote on the sale of LaSalle which, if rejected, could also scupper Barclays’ ambitions.

The value of Barclays’ agreed bid has now fallen to €34 a share – less than the €36.25 first pitched – because of the fall in its own share price. Analysts at Dresdner Kleinwort believe “both parties have a strong incentive to raise their bids before the [shareholder meeting]”.

http://business.guardian.co.uk/story/0,,2079606,00.html

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