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The Times: Banks are accused of trying to play both sides in ABN battle

EXTRACT: Rijkman Groenink, the ABN chief executive, bowed to shareholder pressure and pulled out of plans to join the board of Shell as a nonexecutive director. ABP, the Dutch pension fund, had threatened to vote against Mr Groenink at the Shell shareholders meeting today, arguing that he needed to devote 100 per cent of his time to ABN at present.

May 15, 2007
Patrick Hosking, Banking and Finance Editor

A row erupted yesterday after banks advising ABN Amro were accused of trying to play both sides of the takeover battle by offering to help to finance the Royal Bank of Scotland-led consortium bid for the Dutch bank.

In a newly published letter to ABN, the Royal Bank of Scotland consortium said that it had received numerous offers of financial help from leading financial institutions, “including some institutions currently advising you”.

The institutions referred to in the letter, signed by Sir Fred Goodwin, RBS’s chief executive, and other senior people in the consortium, are understood to be Morgan Stanley and UBS.

The letter, dated May 3, and other documents were made public yesterday after AFM, the Dutch share market regulator, ordered fuller disclosure.

Actively financing the hostile takeover of a client company would be not only treacherous but also a breach of contract. Investment banks sign contracts precluding them from financing unwelcome bidders.

However, it is understood that the offers to help in financing were conditional on the RBS group overcoming resistance from ABN and winning board approval for its offer.

If the RBS group pushes ahead with its €72 billion (£49 billion) conditional approach for ABN, the financing will be huge and potentially highly profitable for the underwriters and sub-underwriters.

Neither UBS nor Morgan Stanley explicitly denied the RBS claim yesterday, but it was plain that any help on financing RBS would be out of the question without ABN approval.

UBS commented: “In order to preserve the impartiality of our advice to ABN Amro, we would not, as a matter of operating policy, favour one potential acquirer over another by proactively assisting it with its acquisition financing.” Morgan Stanley said: “There is a merger agreement between Barclays and ABN Amro and we have committed not to finance any competing proposal.”

ABN continues to pursue an agreed deal with Barclays, which has offered €64 billion in shares for ABN. An essential side-deal, the $21 billion (£10.5 billion) sale by ABN of its LaSalle business in the United States, has been frozen by a Dutch court.

The papers from RBS and its partners Banco Santander and Fortis give fresh detail on how they would have attempted to dismember ABN carefully and slowly enough to keep regulators happy. They promised minimal disruption to customer-facing activities and said job losses would not have been “materially higher” than those envisaged in the Barclays deal.

Yet there was little extra detail on how the bid would be financed, except that the purchase price was explicitly stated as €27 a share in cash plus €11.40 in RBS shares.

John Varley, the Barclays chief executive, yesterday underlined his commitment to the ABN merger and said that Barclays had learnt useful lessons from the disappointing acquisition of Woolwich. “Did we manage the integration well? And did we create the returns on capital that we should have done in the early days? The answer to these questions is no,” he said in a speech in New York.

— Pressure point

Rijkman Groenink, the ABN chief executive, bowed to shareholder pressure and pulled out of plans to join the board of Shell as a nonexecutive director. ABP, the Dutch pension fund, had threatened to vote against Mr Groenink at the Shell shareholders meeting today, arguing that he needed to devote 100 per cent of his time to ABN at present.

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article1790401.ece

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