Barclays under pressure to complete ABN deal

Banking giant Barclays was today facing a make-or-break 48 hours in its battle to complete a £89bn (€131bn) merger with Dutch banking group ABN Amro.

The two companies are currently in exclusive talks to create the world’s fifth-largest bank, but are under pressure to agree a deal by Wednesday when Barclays’ period of exclusivity ends.

That is because a rival trio of Royal Bank of Scotland, the UK’s second largest bank, Belgian based Fortis and Spain’s Santander has asked for access to ABN’s books with a view to making a counter offer.

One source close to the situation at Barclays told the Financial Times: “It will be deal or no deal by Wednesday.”

ABN wants further information from the rival trio before agreeing to open its books, the newspaper reported.

The company has been attacked by its shareholders in recent times for poor performance, but today released earlier than expected first quarter results “in light of recent developments” showing a strong start to the year.

ABN posted net operating profits of €1.23bn for the first three months of 2007, up more than 25% on last year.

Chairman Rijkman Groenink said the company's focus on cost savings and growth had led to a "significantly improved" performance.

The Dutch bank, which is due to respond to the rival consortium by tomorrow evening, could face legal action from its shareholders if it refuses to open its books.

The Children’s Investment Fund, which owns just under 3% of ABN’s shares, told the newspaper it would be in breach of its duties if it failed to do so.

A decision to give information to the rivals could also spark interest from other banking groups such as Spain’s BBVA for parts of the business.

The trio, advised by investment bank Merrill Lynch, is said to be planning to split ABN into equal thirds.

It is understood that RBS would take the Dutch bank’s US operation La Salle, and its Asian businesses, while Santander would claim the business’s Italian and Brazilian divisions. Fortis would take ABN’s retail banking operations in Holland and Belgium.

Analysts think that the trio could afford to pay more than €40 a share for the Amsterdam bank because the increased geographical overlap of the rival team would offer more scope for cost savings.

Barclays’ upper limit for a bid is thought to be €35 a share. It has already offered concessions to the Dutch bank, including moving the combined company’s headquarters to Amsterdam.

If the merger is concluded, it would see Barclays become UK’s second biggest bank and the fifth biggest banking group in the world behind Citigroup, Bank of America, HSBC and the Industrial and Commercial Bank of China.