The investment market is like the dating market; the ugly little duck can turn into a desirable prince (s) after someone has given it some attention. And what happens next, all of a sudden the former duck gets surrounded by a chain of new admirers. They all want her. Or him.
Currently on the scene is ABN AMRO. Not really small, nor exactly ugly but not "performing" according to the stock exchange standards (whatever ever they might be). And the bank found a buyer (Barclays) for its shares willing to pay around the 36 euros.
New admirers of the bank include a group of three European banks that are willing to offer 39 euros. "Why 39," you may ask. Perhaps because 40 looks psychologically too much or simply that 39 divided by three is exactly 13.
The offer of this consortium (formed by the Spanish bank Santander, the Belgium bank Fortis and the Royal Bank of Scotland) will bring ABN to a demolition stage; each bank acquires a part of the whole. Santander receives the desired Italian branch – only recently acquainted and Brazil, Fortis the Benelux part and RBS the American operation.
The question if this split-up would be worse than the original offer from Barclays remains unanswered. Many believe so, I doubted it from a cultural point of view.
In fact the situation in which ABN stranded is one of incomplete acquisition. In the financial world it is to eat or get ate and ABN ate only half its way. It left the company with a well established market in Europe but insignificant in nearly any other continent. For Santander it makes much more sense to acquire Brazil and an Italian part (something its rival – BBVA – could manage so far) and the acquisition of Fortis will make perfectly sense – although a larger cultural mismatch. And the overseas (activities) of RBS seems none illogical.
Cultural speaking the break up would make more sense, because each three banks would expand with similar cultures. Santander would provide a better fit for the Brazilian branch, although you could question whether this fits also the Italian case.
On the other hand, the consortium 'offer would also mean a bigger change, because the name ABN AMRO would cease to exist.
© 2007 Hans Bool