ABN Amro case study

Topics: ABN AMRO, Royal Bank of Scotland Group, 1979 Pages: 24 (1506 words) Published: November 24, 2013
Acquisition of ABN AMRO by the “Consortium”
Case Study

Transaction Overview
• Acquisition of ABN AMRO by
a Consortium comprising of
RBS, Santander and Fortis
declared unconditional on
the 10th October 2007

Overview

Split of ABN AMRO Businesses

• Consortium consisting of RBS, Santander and Fortis on the 25th April 2007 made an initial competing offer to the just
declared Barclays offer to acquire ABN AMRO

Fortis
• BU Netherlands, BU Private Clients, BU Asset Management
RBS
• BU North America, BU Global Clients and wholesale clients in the Netherlands and LatAm (excl. Brazil)
Santander

– In which ABN AMRO shareholders would receive €30.40
in cash plus 0.844x ordinary shares in RBS for each
existing ABN AMRO ordinary share (79% cash)
– Initial offer conditional upon RBS’ acquisition of La Salle bank in US, which was eventually bought by Bank of
America for €15.4 Bn
• Revised offer from Consortium on 16th July offers ABN
AMRO shareholders €35.60 in cash plus 0.296x ordinary
shares in Royal Bank of Scotland for each existing ABN
AMRO ordinary share (94% cash)

• BU Latin America, Antonveneta, Interbank and DMC
Consumer Finance
Shared Assets
• Private equity portfolio, stakes in Capitalia and Saudi
Holland, Prime bank, head office and central functions

– Value of Consortium offer for ABN AMRO of €59 Bn
• Businesses acquired to be split between the Consortium
members according to their strategic appetite and core
competencies

Consortium Acquisition Multiples

– RBS: Corporate Business

• Morgan Stanley acted as
financial adviser to ABN
AMRO
– Largest ever worldwide
acquisition of a bank
– Second largest ever
European cross border
transaction

Fortis

RBS

€24 Bn

€15 Bn

€20 Bn

20x

30x

18x

2010E EPS Accretion

4.3%

7.0%

5.0%

2010E RoI

11.2%

13.2%

>12.5%

– Santander: LatAM and Italy
– Fortis: Benelux, asset management and Private banking
• The Consortium offer proved to be superior to Barclays’ based on
– Higher synergies, thanks to more aggressive approach to
cost cutting and higher skills for revenue synergies
generation

Consideration
Implied 06A P/E

Santander

– Higher cash component, thanks to diversified funding
sources

Source

Public information

2

ABN AMRO Share Price Performance and Offer Value
• ABN AMRO has traded at a
material discount vis-à-vis
the value of the Consortium
offer until a few days before
the announcement of unconditionality
– Doubts over funding
capabilities of the
Consortium offer

ABN AMRO Share Price
€ - Since Barclays Announcement
23 April – ABN
110
AMRO
announces
agreement on
merger with
Barclays & $21
Bn sale of
LaSalle to BoA
105

25 April – ABN
AMRO receives
letter from
Consortium with
indicative price
(€39 p/s incl.
€0.60 div.,+/70% cash)

Premium vs. ABN AMRO- %
29 May –
Consortium
announces
Offer of €38.40
per ABN AMRO
share (€30.44
cash + 0.844x
RBS shares)

16 July – RBS
Consortium
raises its Offer,
increasing the
cash portion

23 July –
Barclays raises
its Offer to
€35.73 per ABN
AMRO share
(€13.15 cash +
2.13x Barclays
shares)

27 July, 6, 10
August –
Santander,
Fortis and RBS
EGM approve
acquisition and
funding plans

5 October –
Barclays
withdraws its
offer

10 October –
50%
Consortium
declares its
offer
unconditional

8
7

40%

4
5

– Fears over MAC clauses

2
100

3

1

30%

6
6

95

ABN vs. Barclays’ Offer

6

20%

€ - Offer Value Rebased to 100
110
105

10%

90

100
95
90
85

0%

85

80

23 Apr 03 May 13 May 23 May 02 Jun 12 Jun 22 Jun

75
Apr

May

Jun

ABN AMRO

Source

Jul

Aug

Sep

ABN AMRO

Oct

12 Jul

22 Jul

01 Aug 11 Aug 21 Aug 31 Aug 10 Sep 20 Sep 30 Sep 10 Oct

RBS

Premium of Consortium Offer vs ABN AMRO Share Price

Barclays Offer

FactSet as of 10th October 2007

02 Jul

Source...
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