Barclays in warning to ABN rivals
Jul 24 2007 By Duncan Tift, Birmingham Post
Barclays has issued a "hands-off" warning to suitors eager to snatch Dutch bank ABN Amro from its grasp.
The bank, which has been courting ABN for several months, has linked up with the Chinese and Singaporean governments in an effort to deter a Royal Bank of Scotland-led consortium from claiming the Dutch prize.
The Far Eastern investment has enabled Barclays to increase its offer for ABN to £45.4 billion.
The deal sees the China Development Bank take a 3.1 per cent stake in Barclays, with Singaporean investment fund Temasek getting 2.1 per cent, by supplying £2.5 billion.
If Barclays' bid for ABN succeeds, the duo will buy further shares worth up to £6.6 billion in the combined business.
Barclays has previously agreed a £45 billion offer with the ABN board but it now faces stiff competition after the
RBS consortium tabled a formal £48.2 billion bid on Friday.
The China Development Bank was founded in March 1994, and falls under the direct jurisdiction of the Chinese government's state council.
The bank, which has assets of around £150 billion, has funded infrastructure developments and national projects but earlier this year signalled that it would take on a broader investment approach.
Singapore-owned Temasek has an investment portfolio worth £38.9 billion in sectors including transport, real estate and energy.
If the merger goes ahead, CBD will own a stake of between six and eight per cent in the new group and Temasek will have a holding of around three per cent.
The new Barclays proposal for ABN includes a cash element of £16.7 billion - around 37 per cent of the new offer - although the rival RBS-led bid is comprised of 93 per cent cash.
Barclays said its new offer gave certainty and flexibility to ABN's shareholders.
Chief executive John Varley said the Barclays proposals offered a "compelling story" to the Dutch bank's shareholders, while allowing opportunities for further growth in Asia through the tie-ups with CDB and Temasek.
Mr Varley added that the Chinese shareholding was a "very significant event" and that he was "entirely comfortable" with the involvement of the Chinese in the business.
He said: "This is the biggest external investment they have made and they have chosen Barclays. There should be a significant and positive reaction in global markets."
Barclays has also won regulatory approval to buy into a Chinese trust company New China Trust & Investment, thereby securing a foothold in the country's fast-growing asset management sector.
Sources familiar with the situation said yesterday that Barclays could be allowed to buy a nearly 20 per cent stake in the company, one of the country's oldest trust firms.
Negotiations between the two companies have been going on for more than a year, the sources said. The purchase will make Barclays the first foreign bank with a stake in a Chinese trust firm, while others, including Morgan Stanley and UBS, are still in talks with potential Chinese partners.
"The deal will allow Barclays to offer wealth management services and financial derivative products to Chinese clients through New China Trust's licences and network," said one of the sources, who declined to be identified.
"It's not a very expensive deal but it brings a very good platform to Barclays in China."
He declined to comment further on the financial details of the deal.
News of the bank's investment and its revised bid for ABN came as Barclays said it had delivered record financial results in the first half of the year.
The bank said it had increased pretax profits by 12 per cent to £4.1 billion after an "exceptionally strong performance".
ABN said it "welcomed the opportunity for shareholders to consider two competing proposals on a level playing field".
