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Barclays: ABN Amro bid withdrawal poses bigger questions

5th October 2007
By Kieran Hines

Barclays's admission of defeat in the battle for ABN Amro raises questions over its own future.

The long-running takeover war for ABN Amro has finally drawn to a close, after Barclays was forced to admit defeat to the Royal Bank of Scotland-led consortium by withdrawing its E62 million bid. Questions will now be raised over Barclays's strategy in the wake of this setback, with rumors of it becoming a takeover target itself likely to resurface.

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Barclays's move brings this long-running saga, which has involved a legal challenge and a case of shareholder uproar, one step closer to conclusion. The UK bank failed to obtain 80% shareholder approval for its cash and share offer, and is in line to receive a E200 million break fee from ABN Amro.

Barclays has, to a degree, been a victim of circumstance, as the overall value of its cash and share offer was hit by the recent dip in bank share prices. However, despite this, and the wrangling over the sale of LaSalle, once the Royal Bank of Scotland (RBS)-led consortium, which also includes Fortis and Santander, threw its hat into the ring - gazumping the Barclays bid in both value (E71.1 billion) and cash proportion - this was always going to be the most likely outcome.

For the RBS consortium, the acquisition now looks to be a near certainty. Its share of ABN Amro is expected to include new cash management operations, ABN Amro's wholesale banking operations and retail operations in Asia, the Middle East and the US. Cost synergies from these businesses are expected to reach E1.24 billion within three years. Should this deal go through, RBS will have a big task to integrate these businesses, but the acquisition has the potential to significantly expand the group's geographical presence, making it a truly global player.

However, all this is a given. The big question is what next for Barclays? When the ABN Amro deal was first announced, many commentators saw this move as make or break. Rumors have long circulated about Barclays being a takeover target itself, and these are likely to resurface over the coming weeks. Certainly, as one of the largest retail banks and card issuers in the UK, and with a growing card portfolio in Spain, Germany and the US, it remains an attractive target. The share buyback program will help drive up the cost, but it is unlikely that this alone will stave off a potential suitor.

The coming weeks and months are set to be very interesting indeed.
'End Intelliext

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