Two giant bank deals in one day
UK banking giant Barclays has announced it will acquire Dutch global bank ABN Amro in a $91 billion deal. At the same time, the deal would cerate the worlds' #1 asset management company, and one of the five largest banks worldwide. The deal has been termed a merger, but it's clear that the more profitable Barclays will dominate the stumbling ABN Amro, which went from agressive acquirer to seller in recent year.
In addition, as part of the deal, ABN Amro announced it would sell its US-based LaSalle bank chain for to Bank of America for $21 billion.
The deal is a designed to keep ABN from being acquired (and split up) by a consortium of major European banks: Royal Bank of Scotland, which wants to buy ABN's US operations; Belgian bank Fortis, interested in the holdings in the Netherlands, and Spain's Banco Santander, which wanted to get the other international operations, including those in South America. The LaSalle sale is seen as a spoiler aimed at the consortium. That group may still, however, outbid Barclays.
If it goes through, it will be the biggest bank deal ever in Europe. And the disappointed suitors are likely to go looking for other acquisition targets, as they have already assembled the cash. Barclays has reecntly struck in the US by buying supbrime mortgage company EquiFirst this year..
For Bank of America (the US's #1 bank after Citigroup), the buying of LaSalle would signal a return to acquisitiveness. The Chicago-based bank would plug a gap in BOA's national coverage. According to a Wall Street Journal article ("Bank of America Can't Resist LaSalle's Allure". 4/21/06):
Bank of America has spent much of the past three years trying to prove to investors it can expand its existing operations, a key strategy because its U.S. deal making must ultimately slow. The theme of its February investor day was this so-called organic growth. Mr. Lewis has often said he sees 'no strategic imperative' to make acquisitions but would be opportunistic.
The impression is that big companies get addicted to acquisitions, as they can show immediate results more dramatic than gradual improvement of operations. But, as the article points out, it coming close to owning 10% of all US retail banks, a legal limit on banking growth.
For BOA, it is also a continuation of its war with #3 J.P. Morgan, which already has a strong position n the Chicago area, having bought Bank One in 2004.
