The fancy dancing that ABN Amro (NYSE: ABN ) is doing in its deal with Barclays (NYSE: BCS ) continues to get more interesting. First, there's the competing offer for ABN from a consortium of Royal Bank of Scotland, Fortis, and Banco Santander Central Hispano (NYSE: STD ) . And then there's the ruling from the Dutch courts that ABN shareholders must be allowed to vote on the $21 billion sale of LaSalle, ABN's U.S. business, to Bank of America (NYSE: BAC ) as part of the merger ABN-Barclays agreement. Either way, the will of ABN shareholders will be crucial to the outcome.
When ABN and Barclays originally announced their intention to merge, I was especially intrigued by Barclays' asset-management business and what the merger might mean for the combined companies. But the approximately $99 billion offer from the consortium is clearly superior to the $89 billion offer from Barclays -- if the consortium can line up the financing.
And that's where one of the complications arises. In the most recent press release from ABN, it appears that not all members of the consortium have lined up financing to complete a deal.
Furthermore, even though Royal Bank of Scotland has included $24.5 billion of the $99 billion total for LaSalle, that contribution is conditional on the purchase of the entire company taking place. The resulting problem for ABN is that it would owe Bank of America a breakup fee if it backed out of the existing deal for LaSalle.
That's why the Dutch ruling is such a big deal. Considering that LaSalle is an important piece of the consortium's bid and that its sale is a requirement for the Barclays deal to close, whichever way the shareholder vote falls on the LaSalle now becomes extremely important.
The Barclays offer to ABN Amro shareholders is a good deal. The consortium's offer is even more attractive on the surface, but with the financing apparently up in the air, spurning the Barclays bid would carry some risk.
Which way the shareholders vote is likely to be further complicated by the wishes of the members of ABN Amro's management. Under the Barclays deal, current ABN executives will retain their jobs. It isn't clear to me that such provisions are in place with the offer from the consortium.
Management points to the uncertainty in financing and other conditions of the consortium's offer as signs that the consortium offer is not superior to the one from Barclays. These are indeed real uncertainties, but shareholders should also consider the other factors that weigh on management's recommendation.
I still think Barclays is a great business, and if I were an ABN Amro shareholder, I'd have no problem with getting Barclays shares. That said, if shareholders can get a higher immediate return from a cash sale of ABN to the consortium and then turn around and purchase Barclays shares in the open market, that's clearly a better deal for the shareholders. It also allows shareholders the flexibility to do what they wish and not be locked into Barclays if they don't wish to be.
Fortunately, the shareholders will get a chance to vote and decide this issue for themselves, regardless of what ABN's management tries to tell them is best.