London-based hedge fund The Children’s Investment Fund was the first to vocalise concerns over ABN’s poor performance. It was followed by a second UK hedge fund, Toscafund; PGGM, one of the largest Dutch pension funds; and VEB, an association representing Dutch retail investors.
While not interrupting its expansion campaign – at the beginning of March, ABN announced the purchase of a majority stake in Pakistan’s Prime Bank for €172m, becoming the second largest foreign bank in the country and one of the top 10 players – the Dutch bank agreed to exclusive talks with the UK’s Barclays. If successful, the deal would create Europe’s second largest banking group, behind HSBC, and could launch a new wave of consolidations.
Barclays’ proposition has been strengthened by concessions granted to ABN AMRO, such as an ABN AMRO-appointed chairman for the new entity, the location of the group’s headquarters in Amsterdam and for the new group to be subjected to the Netherlands’ central bank authority.
Details of the transaction were not disclosed when The Banker went to press and the price Barclays would pay depends on several factors. These include the ability to obtain satisfactory cost savings, the extent to which Barclays can boost sales by distributing its products through ABN’s overseas customers, and the level of return on investment that the UK bank would have to generate to win the support of its own shareholders.
Furthermore, ABN’s wholesale banking division has struggled for years with high costs, which is, according to some rivals, the main reason why the bank has not been taken over before. Barclays will have to solve this issue too.
The Children’s Investment Fund looked favourably on the UK bank’s interest but insisted ABN go through a market assessment period and leave time for other possible contestants to put proposals together.
ABN’s domestic rival, ING, said it did not feel pressured to make a large acquisition but said it would take part in an industry consolidation.
Lehman hedge fund stake
New York-based Lehman Brothers has taken a 20% stake in DE Shaw, one of the world’s biggest hedge fund groups. The US bank has already invested in other profitable hedge funds, including Marble Bar Management, Ospraie Management and GLG Partners.
The Toronto Stock Exchange has announced it will team up with New York-based International Securities Exchange to create a Canadian derivatives exchange. The deal will pose competition to the Montreal Exchange, which has had an eight-year monopoly on Canadian derivatives instruments.
Amsterdam-based Euronext has agreed to sell almost all of its 41.5% stake in LCH.Clearnet to the clearing house’s customers following plans to reduce tariffs. Euronext will cut its stake to 5% in 2008 and will be paid about €460m, approximately the price it paid for the then London Clearing House at the end of 2003.
The Shanghai exchange has announced that it is studying ways of opening the market to Hong Kong investors, following the city government’s commitment to turning Shanghai into an international financial centre.
Merrill Lynch carbon deal
New York-based Merrill Lynch has taken a minority stake and provided debt financing to the Russian Carbon Fund, a Dutch company, for a deal understood to be worth $200m. The transaction will secure the US investment bank a foothold in the carbon trading and emissions reductions market in Russia and the Commonwealth of Independent States.
Citi has launched a $14bn bid for Nikko Cordial, Japan’s third largest broker, following an accounting scandal that led to a downturn in business and an executive shake-up. The deal would be the largest foreign takeover of a Japanese company. Mizuho Financial Group has decided to tender its 4.8% stake in Nikko to Citi, Reuters reported, quoting a source close to the matter, making Citi’s bid more likely.
New York-based Morgan Stanley has announced a joint venture with the State Capital Investment Corporation, Vietnam’s leading state investment agency. The joint venture will provide investment banking services. The deal is the first of its kind in the country.
HSBC, Standard Chartered, Citi and Bank of East Asia have received approval to incorporate locally in China and aim to offer local currency banking services. Under new Chinese banking regulation rules, foreign banks are required to have registered capital of Rmb1bn ($129m) for their Chinese units and capitalise each branch at Rmb100m in order to conduct retail yuan business in China.
Bank of China has announced it is looking at further overseas acquisitions after it took over Singapore Aircraft Leasing Enterprise for nearly $1bn last year.
National Bank of Dubai and Emirates Bank International have agreed to merge, creating the Gulf’s largest lender by assets. The deal puts pressure on other Gulf lenders to consider mergers and acquisitions. Abu Dhabi Commercial Bank has subsequently announced it is considering acquisitions in Egypt and India in order to compete internationally.
