A Dutch court asked ABN AMRO in its verdict on Thursday to freeze its $21 billion sale of US unit LaSalle Bank. The ruling has dealt a severe blow to its agreed takeover by Barclays Plc and making it easier for a rival group of suitors to bid for the entire ABN. The court ruling, which now necessitates any sale of LaSalle to be submitted to a shareholder vote, is clearing the way for a rival bid from a consortium led by Royal Bank of Scotland. The $91 billion bid by Barclays is partly contingent on the separate sale of LaSalle to Bank of America. Therefore the deal that could create one of the world’s largest banks is now in trouble.
The court said ABN Amro must seek shareholder approval before it can sell its US subsidiary LaSalle to Bank of America Corp. The court said the sale of LaSalle was so interwoven with the Barclays takeover bid that it should have been put to shareholders for a vote. ABN had argued the deal was too small to require shareholder approval. Peter de Vries, leader of the Dutch shareholder rights group VEB which had originally filed the case, called for ABN chief Rijkman Groenink to resign, while TCI, the activist hedge fund, repeated its demand for Martinez ‘to assume full control of the sale process’.
The recent ruling will have now far reaching consequences on the future of ABN Amro. Now there are high chances that of a further legal action by Bank of America against ABN. BOA has been considering its response to the ruling, but its lawyers last weekend had made it clear that the bank would ‘be compelled’ to sue ABN Amro for damages if the sale was blocked. BOA’s suit is expected to be filed in New York, which may provide the US bank with an influential device to push through its offer for LaSalle. Even though the sale is submitted to a vote, shareholders would have to earnestly evaluate the financial risks to the banks of rejecting a deal with BOA.
Another fall of the ruling is that it has weakened the position of Rijkman Groenink. ABN Amro’s chief executive has already made his intention to oppose to the proposed break-up bid for ABN Amro by Royal Bank of Scotland, Santander of Spain and Fortis, the Belgo-Dutch group. And Groenink favors an agreed takeover by Barclays. In the meanwhile, shareholders reiterated their demand that Groenink should step down from his position. But even if he stays, he has less power to defy a break-up bid.
The ruling has also made it obvious that in the future battle for ABN Amro, shareholders come first. Groenink had argued that the interests of stakeholders should also be considered, whereas regulators have expressed anxiety about the impact of a break-up bid on the stability of the financial system.
As a matter of fact, Royal Bank of Scotland wants to acquire LaSalle to bolster its position in the Chicago, where it already owns the Charter One franchise, and supplement its huge footprint in the Northeast. On the other hand, Bank of America, which has parallel intention behind its LaSalle acquisition, maintains that it already has ‘a binding contract’ for the bank in place. ‘We intend to take all necessary steps to protect our legal rights,’ said Robert L. Stickler, a Bank of America spokesman.
