$100 billion and nobody notices
After a protracted seven-month fight with twists and turns aplenty, Dutch bank ABN Amro was finally acquired last week to surprisingly little fanfare. After all, this is one of the biggest banking deals ever.
The buyers are the consortium of European banks, Royal Bank of Scotland (RBS), Spain's Banco Santander, and Belgium's Fortis, who together managed to outbid UK-based Barclays Bank.
The final deal for the Netherlands #1 bank was for $101 billion, three times the bank's book value. Many analysts believe they overpaid. RBS stock, for example, is down 15%.
Banco Santander will get ABN Amro's Brazilian and Italian units, Fortis will get the company's Dutch consumer banking operations and its private banking units. RBS gets the Asian banking division and the investment banking operations. The US division, LaSalle bank, a Chicago regional bank, was sold off earlier this year to Bank of America, for $21 billion as part of the planned Barclays deal. Barclays, buy the way, had planned to keep the whole operation intact. Ironically, RBS was most eager to buy LaSalle to increase its US foothold.
Barclays, as it turns out, is using its unspent capital for a major buyback of stock, which has caused it market value to shoot up. It even got a 200 million euro breakup fee from ABN Amro.
Given all the troubles US and European banks have had because of the US credit crunch, it's amazing how they can come up with the money for such bold moves. Any day on which over $100 billion changes hands, is a remarkable one. But the general banking crisis combined with what everyone sees as a bid too high, has made this more of a sobering than a joyous occasion. That is, except for the flock of investment bankers, lawyers, and other finanicl professional who acted as midwives to the deal.
