The Acquisition of ABN AMRO (B)

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Case Details:

Case Code : BSTR346
Case Length : 23 Pages
Period : 2007-09
Pub Date : 2009
Teaching Note :Not Available
Organization : ABN AMRO / Royal Bank of Scotland / Fortis / Banco Santander Central Hispano
Industry : Banking / Financial Services
Countries : UK, Belgium, Spain, The Netherlands

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Introduction Contd...

RBS had led a consortium of banks comprising Dutch-Belgium banking major Fortis and Spain's Banco Santander in early 2007 to acquire ABN AMRO. In October 2007, the consortium acquired ABN AMRO bank for US$ 100 billion. The acquisition was the largest in the banking industry till then.

As per the deal, RBS got ABN AMRO's wholesale banking and Asian operations, Fortis got the Dutch operations plus the wealth and asset management businesses, and Banco Santander got the Brazilian and Italian operations. For the deal, the consortium agreed to pay 93% in cash and the rest in the form of RBS shares. 

The acquisition cost RBS US$ 38.25 billion, Fortis US$ 33.75 billion, and Banco Santander US$ 27.99 billion. The acquisition of ABN AMRO led Fortis into trouble too, resulting in its CEO being ousted in July 2008. The acquisition had depleted the equity capital of Fortis to a great extent and it was partially nationalized in September 2008. In October 2008, the government of the Netherlands nationalized the Dutch activities of Fortis, including the Dutch operations of ABN AMRO, in return for € 16.8 billion6 which was meant to ease the company from the capital crisis it was facing because of the global financial crisis7...

 Excerpts >>

6] On October 09, 2009, € 1= US$ 1.475
7] The sub-prime crisis that emerged in the US in late 2007 led to a crash in prices of several asset classes. Investments of several financial institutions and individuals incurred deep losses. Several industries eliminated thousands of jobs resulting in an economic slowdown and a global financial crisis.

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