Dutch bank shares soar over Barclays merger talk

SHARES in ABN AMRO, the biggest bank in the Netherlands, hit a record high on Monday after what sources said was a merger approach by Barclays for Europe’s biggest financial services deal.

As speculation of a takeover or break-up of ABN AMRO intensified, Barclays approached its Dutch counterpart with a merger blueprint that would create a global bank worth about €120 billion, sources familiar with the matter said.

Barclays, Britain’s third-biggest bank and with a big presence in Europe and Africa, acknowledged press speculation about its interest in Amsterdam-based ABN AMRO and said it would clarify its position before stock markets open on Tuesday.

Its holding statement indicated it has or had some interest in ABN, which owns large retail banks in the US, Brazil, Italy and the Netherlands.

Several other banks, including Dutch rival ING, Spain’s BBVA and France’s BNP Paribas have also expressed interest — directly or through advisers — in either exploring a full merger with ABN AMRO or buying some of its large non-Dutch businesses.

ABN has come under pressure from investors, including hedge fund TCI, to consider a sale or break-up to boost shareholder returns after several years of under-performance.

Any talks are at an early and uncertain stage, sources said.

“An approach by Barclays is realistic in our view,” analysts at Keefe, Bruyette & Woods said in a research note, estimating that Barclays could offer 31.3 per ABN share, and go higher if it sold off some units that did not fit its plans.

“If confirmed, we believe that an offer by Barclays is likely to trigger counter offers by other international banks,” KBW added.

Analysts said a hostile approach was unlikely to succeed and Barclays and others were likely to promote themselves as friendly.

“Every bank will be promoting themselves as a white knight, it could get quite crowded,” one analyst said.

Many industry analysts and bankers regard ABN as being ripe for a sale or break-up.

TCI said in February ABN was significantly undervalued and called on it to merge, sell or spin off some of its assets or potentially the whole business. Other investors, including hedge fund Toscafund, have also called for change.

Barclays has made no secret of its plans to expand internationally. John Varley, chief executive, last month said acquisitions were an option.

Industry analysts have said a combination of ABN and Barclays would make good strategic sense, but so would a deal between ABN and many of the big European banks.