Mergers, Acquisitions and Takeovers Case Study

China Development Bank joins Barclays bid for ABN AMRO:Can It Beat the RBS Consortium?

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Abstract:
The saturated growth prospect of ABN AMRO, the European banking giant, forced its supervisory board to actively initiate a merger, acquisition or break up of the bank. Barclays was the first to negotiate the merger with ABN AMRO. But ABN AMRO was counter bid by Royal Bank of Scotland (RBS), who along with Belgian-Dutch bank Fortis and Banco Santander of Spain formed a banking consortium and went for a royal bid in an attempt to beat the offer laid down by Barclays, one of its top rivals. The offer included 70% cash and 30% share holding components. With the fulcrum leaning RBS consortium's way, the twist of the tale took place when the most profitable Chinese bank, China Development Bank (CDB) joined hands with Barclays in order to increase its bidding value. But the revised bid price of Barclays still remained below RBS consortium's royal bid. The only advantage that Barclays had was the initiative to merge with ABN AMRO, keeping the bank and its shareholders' value intact, rather than breaking the bank into several units. With both bids having their own advantage, the future of ABN AMRO remained a decisive factor in the hands of its share holders and the future market conditions.

Pedagogical Objectives:

• To understand the pros and cons of a banking merger.
• To analyse the strategies adopted by the global banking giants in order to make their bid successful.
• To analyse how the shareholders and the market play an important role in the case of merger and acquisition.

Keywords : Banks, China Development Bank (CDB), Barclays plc, Royal Bank of Scotland (RBS), ABN AMRO Holding NV, TCI (The Children's Investment) Hedge Fund, Financial institution, LaSalle, Sub-prime loans, Temasek Holdings, Strategic investors, Asian market, Consortium, Bidding, Bank of America (BoA)

Contents : 
ABN AMRO: The European Banking Giant
Operating Incomes and Operating Expenses of ABN AMRO
Relationship Between Net profit and Operating Profit of ABN AMRO
Barclays: Third Largest Banking Giant of UK
RBS Led Consortium: A Royal Bid
China Development Bank: The Most Profitable Chinese Bank
The Tussle: Barclays Vs RBS Consortium
Snapshot of the Merger Proposition Barclays Vs RBS Consortium