US hedge fund Atticus Capital has recommended the UK based bank, Barclays, to abandon its 65 billion-euro or $87 billion offer for Dutch bank ABN AMRO after buying a significant stake in the British bank. Atticus in written letter to Marcus Agius, Barclays chairman, advised that that it was concerned the bank will be issuing shares to buy ‘an inferior business, in an auction at inflated prices.’ Atticus Capital, an activist hedge fund with a 1 percent stake in Barclays, has warned that it will vote against it if Barclays proceeds. In response, Barclays has stated on Monday that Atticus’s views were not representative of reaction from its investors. However, its shares surged over 3 percent on the prospect that the comments could make it harder for it to succeed or raise its offer.
Barclays, which has discussed the ABN deal with more than 100 of its shareholders has said it had no intent of dropping the bid. The firm further stated, ‘If other shareholders feel differently, we encourage them to engage in a dialogue with us. We believe this transaction will create significant incremental value for our shareholders and meets our rigorous financial criteria.’
It is believed that the shareholders realized the raison d’etre for a Barclays takeover of ABN but they remained apprehensive over the dangers of it overpaying. In addition, Atticus is so far the only activist investor to have expressed its resistance to an ABN takeover. Barclays is known to have been in contact several times in the past two months with TCI, the hedge fund that triggered the sale of ABN. Equipped with a shareholding of about 1 per cent, TCI wrote to ABN in February submitting five special resolutions to a vote at its annual meeting, including that it should explore the idea of a sale or break-up.
On the other hand, Barclays is known to have been in regular contact with TCI, the hedge fund that prompted the sale of ABN. With a shareholding of about 1 percent, TCI wrote to ABN in earlier this year suggesting five special resolutions to a vote at its annual meeting, including that it should explore the idea of a sale or break-up. However, in recent times, it has appeared that quite a few of Barclays’ largest UK-based shareholders are cautioning the bank not to raise the price it is prepared to pay for ABN. Holders of more than 10 per cent of its shares in private say that even though they are not conflicting the bid at present levels, but they will do so if Barclays sweetens its bid for the Dutch-based group.
Atticus has stated that by continuing to pursue this ‘risky strategy’ Barclays will hurt management credibility and anger shareholders, eventually making the group defenseless to a bid. Shareholders would be best served by the British bank returning capital, the New York firm insisted. Moreover, TCI and Atticus were both involved in forcing German stock exchange operator Deutsche Börse to abandon its bid for the London Stock Exchange and driving out its chief executive Werner Seifert.
