Bragging Rights

Who's Advising on ABN Deal? Only 19 Who Insist `I'm Spartacus'
By Ambereen Choudhury

Aug. 28 (Bloomberg) -- Like the rebellious Roman slaves who vowed to save their leader by declaring ``I'm Spartacus,'' the contested sale of ABN Amro Holding NV has 19 investment banks each insisting it is advising the would-be winner in the financial industry's largest takeover.

The Romans never found Spartacus and no one may ever know the real adviser to the victor of this six-month battle. Goldman Sachs Group Inc., UBS AG, Morgan Stanley, Lehman Brothers Holdings Inc. and N.M. Rothschild & Sons Ltd. make equal claim to coaching Amsterdam-based ABN Amro.

For its 61 billion-euro ($83.5 billion) bid for the Netherlands' biggest bank, Barclays Plc has retained Citigroup Inc., Credit Suisse Group, Deutsche Bank AG, JPMorgan Cazenove Ltd. and Lazard Ltd. as counselors. A Royal Bank of Scotland Group Plc-led group appointed Merrill Lynch & Co. the strategist for its 72 billion-euro counter offer and enlisted Greenhill & Co., Fox-Pitt, Kelton Ltd., NIBC Holding NV, Banco Santander SA, Fortis and its own executives for extra help.

``I cannot recall a deal that has so many advisers,'' said Scott Moeller, a professor of mergers and acquisitions at Cass Business School in London and a former banker at Morgan Stanley and Deutsche Bank. ``The most significant issue is bragging rights. It's more important to the bank than the client.''

No securities firm can afford to be left out if it hopes to be counted among the leaders in a record year for mergers and acquisitions. Takeovers already surpassed $3.28 trillion in 2007, just $277 billion short of last year's total, according to data compiled by Bloomberg.

Full Credit
Each banker to ABN Amro will be credited with the full value of the purchase in mergers tables. Those representing London- based Barclays and Edinburgh-based Royal Bank only get recognized if their suitor wins. Santander of Santander, Spain, and Fortis, based in Brussels and the Dutch city of Utrecht, are bidding with Royal Bank.

This year's top three advisers -- New York-based Goldman, Citigroup and Morgan Stanley -- have little more than ABN Amro's $90 billion market value separating them in the rankings.

Goldman and Morgan Stanley's spots are safe no matter who wins because they are working for ABN Amro. Citigroup will lose its No. 2 ranking if the Barclays bid fails, while Merrill would drop as low as eighth place from fifth should Royal Bank lose.

A handful of the firms will get the lion's share of what New York-based Freeman & Co. estimates to be as much as $459 million in M&A fees because most are providing limited services for their clients, said people with knowledge of the talks. Bankers may collect another $170 million for underwriting the stocks and bonds needed to finance the acquisition, according to Freeman.

`Trophy Deal'
The purchase of the biggest Dutch bank will eclipse Travelers Group Inc.'s $69.9 billion buyout of Citicorp in 1998, until now the biggest in the financial industry. It also may become the third-largest ever, behind the $186 billion acquisition of America Online Inc. by Time Warner Inc. in 2000 and Vodafone Group Plc's $185 billion hostile takeover of Mannesmann AG in 1999, according to Bloomberg data.
``Nobody wants to miss it,'' said David Dodds, an investment analyst who helps manage $1.2 billion at SVM Asset Management in Edinburgh. ``It's a trophy deal.''

ABN Amro has become more important after the rout in securities related to subprime mortgages caused investors to shun riskier assets, increasing costs for financing mergers.

Fees from advising in mergers accounted for about 5 percent, or about $6.4 billion, of the combined revenue last year at Goldman, Morgan Stanley, Merrill and Lehman. Fixed-income and equities trading generated about half of the firms' revenue and underwriting accounted for almost 9 percent.

Slowest Month
August has been the slowest month for deals since July 2005, Bloomberg data show. London-based Cadbury Schweppes Plc, the world's biggest candy maker, and Virgin Media Inc. have delayed asset sales. Atlanta-based Home Depot Inc., the biggest home- improvement retailer, had to cut the price on its contractor- supply business by 18 percent to $8.5 billion to salvage a sale.

Using a group of banks allows companies to reward financiers and eliminate support for rival bidders.

``Companies hire advisers to honor prior favors and relationships,'' said Roy Smith, professor of finance at New York University's Stern School of Business and former head of Goldman's London office. ``It probably doesn't make too much difference how many you have, except that the chairman will get fewer frantic pleading calls if he hires several.''

Six Banks
Barclays hired JPMorgan Cazenove and Lazard in February and added Citigroup, Credit Suisse and Deutsche Bank in March, the month it announced the merger talks. It also has about 15 of its own employees on the deal.

Until last year, Barclays Chairman Marcus Agius, 61, was the U.K chairman of New York-based Lazard, the firm run by Bruce Wasserstein. He helped arrange Halifax Group Plc's 9.8 billion- pound ($20 billion) purchase of Bank of Scotland in 2001 to create HBOS Plc, the biggest U.K. mortgage lender.

Lazard's team is led by Jeffrey Rosen, 59, who advised Wal- Mart Stores Inc., the world's biggest retailer, in its acquisition of U.K. supermarket chain Asda Group Plc for $10.8 billion in 1999.

JPMorgan Cazenove's corporate-broking relationship with Barclays stretches back more than two decades. Cazenove, overseen by Chairman David Mayhew, 67, formed a joint venture with New York-based JPMorgan Chase & Co.'s U.K. unit in 2004.
Corporate Brokers
Corporate brokers, unique to the U.K., act as liaisons with investors and help companies comply with London Stock Exchange rules. They accept nominal fees or work for free, expecting the relationship will lead to underwriting and M&A assignments.

Credit Suisse, the second-largest Swiss bank, has been Barclays's other broker for about 15 years. Zurich-based Credit Suisse worked on the U.K. company's largest deals, including the 5.9 billion-pound purchase of Woolwich Plc in 2000, and bought Barclays's BZW equities and investment-banking arm 10 years ago. The team is led by London-based European mergers chief David Livingstone, 44, and Ewen Stevenson.

Frankfurt-based Deutsche Bank's team is led by Tony Burgess, 48, and Tadhg Flood, 35, while Citigroup's is under Hamid Biglari, 48, and Christopher Williams. The biggest German bank and Citigroup, the largest U.S. financial-services company, were hired for their relationships with hedge funds and prime- brokerage businesses, according to two people with knowledge of the deal.

Balance Sheets
``A number of the advisers are there to prevent them representing others,'' said Philip Keevil, a senior partner in London at Compass Advisers LLP and former head of European mergers at Salomon Smith Barney Inc. ``Some of them are there because they have large balance sheets and could help push the ball over the line.''

Morgan Stanley's Donald Moore and UBS's John Cryan are the lead advisers to ABN Amro. Zurich-based UBS arranged the Dutch bank's sale of its Bouwfonds property management units for 1.69 billion euros last year. UBS, the biggest Swiss bank, and Morgan Stanley, the second-largest U.S. securities firm by market value, have been paid about 39 million euros each, according to U.S. regulatory filings.
ABN Amro's own employees are playing a part, along with bankers from Goldman, New York-based Lehman and London-based N.M. Rothschild.

The Royal Bank-led group is relying on a team of about 15 Merrill bankers led by Andrea Orcel, 44, and London-based Matthew Greenburgh, 46. Merrill has advised Royal Bank since about 1999, when the company bought National Westminster Bank Plc in a 23.6 billion-pound hostile takeover. Merrill has also advised Santander, according to Bloomberg data.

Merrill Lynch
New York-based Merrill, the third-biggest U.S. brokerage firm, may earn about 90 million euros from advising the Royal Bank group if it's successful, according to a person with direct knowledge of the talks. It may get another $120 million for helping finance the deal, Freeman's estimates show.

The members of the Royal Bank group are also using advisers from their own companies as well as New York-based Greenhill, NIBC, based in the Hague, and Fox-Pitt, Kelton, a London firm specializing in the financial industry, according to Bloomberg data.

ABN Amro spokesman Jochem van de Laarschot said the company has ``a number of advisers and they each have their role.'' Spokespeople for all the banks weren't immediately available or declined to comment.

Multiple advisers are common in larger deals. The 13 billion-euro takeover battle for Altadis SA, the Spanish maker of Gauloises cigarettes, and the 63 billion-euro contest for Endesa SA, Spain's largest power company, both attracted about a dozen investment banks, according to Bloomberg data.

``Increasing the number of advisers doesn't increase the quality of the advice,'' said Compass's Keevil. ``It's payback time for the relationship banks, particularly for ABN Amro, for which this is the last deal.''

Tying up loose ends - Fortis gains investor approval for ABN bid, rights issue approval to follow; Barclays wins EU anti-trust approval

Fortis Shareholders Back Proposal for ABN Amro Bid (Update2)
By Martijn van der Starre and John Martens

Aug. 6 (Bloomberg) -- Fortis, Belgium's largest financial- services company, moved a step closer to buying part of ABN Amro Holding NV after shareholders backed a plan to raise as much as 13 billion euros ($17.9 billion) to pay for the deal.

Investors at a meeting in Brussels approved the 72 billion- euro joint bid by Fortis and two other banks for Amsterdam-based ABN Amro, Fortis said today. More than 93 percent endorsed a rights offer to finance the transaction, which also needs the backing of a meeting in Utrecht this afternoon.

The agreement paves the way for Fortis, Royal Bank of Scotland Group Plc and Banco Santander SA, whose offer is mostly in cash, to trump a competing 65.3 billion-euro share and cash offer from Barclays Plc, said Alan Beaney, who helps manage $2 billion at Principal Investment Management.

``The Royal Bank consortium will win now with their higher offer,'' said Sevenoaks, England-based Beaney, whose holdings include shares of Barclays and Royal Bank. ``Ironically, Barclays's share price and their offer will rise because investors think they are less likely to do the deal.''

Barclays stock rose 0.8 percent to 684.5 pence as of 2:30 p.m. in London. Shares of Fortis fell 1.6 percent to 28 euros in Brussels, valuing the company at 36.5 billion euros.

Fortis plans to pay 24 billion euros for the Dutch retail and commercial banks, as well as the asset-management and private-banking units. It's bidding for 40 percent of ABN Amro, the largest part after ABN Amro sells its Chicago-based LaSalle unit to Bank of America Corp.

`Major Step Forward'
Fortis would increase the number of branches in the Netherlands to 720 from 159 and add more than 4 million retail customers with the purchase. The combined private banking and asset-management units would manage about 500 billion euros in assets, Fortis, based in Utrecht and Brussels, said.

The purchase would be ``a major step forward for our company and we'll be able to speed up our development on an international level,'' Fortis Chief Executive Officer Jean-Paul Votron told shareholders before the vote. It will lead to ``diversification and a better balance in our portfolio,'' Votron said.

ABN Amro withdrew its recommendation of the Barclays bid on July 30, saying it's financially inferior to the proposal by the Royal Bank group. The original agreement with Barclays, announced April 23, won European Union antitrust approval today.

``We continue to believe that Barclays's offer will ultimately deliver more value to ABN Amro shareholders with a low degree of risk and a high certainty of completion,'' Barclays CEO John Varley said today in comments passed on by spokesman Alistair Smith. The formal offer to shareholders, ``is another tangible step towards the merger with ABN Amro,'' Varley said.

`Blow Through Numbers'
Barclays made its formal offer to shareholders today and will hold a meeting with its shareholders to approve the offer Sept. 14. London-based Barclays bid 2.13 ordinary shares and 13.15 euros a share for each ordinary share of ABN Amro.

``The bid of the others is basically maximized,'' Barclays board member and head of consumer banking Frits Seegers said in an interview in Mumbai on Aug. 4. ``Our bid with the rise in share price will blow through these numbers.''

Edinburgh-based Royal Bank is to hold a meeting with its shareholders Aug. 10. ABN Amro shareholders will consider both bids Sept. 20. ABN Amro spokesman Jochem van de Laarschot declined to comment today. Spokespeople for Royal Bank and Barclays also declined to comment.

The acquisition of ABN Amro would be the largest financial- services takeover, exceeding the $69.9 billion combination of Citicorp and Travelers Group Inc. in 1998. Under the plan, Royal Bank would take the Dutch bank's investment banking and Asian consumer units and Banco Santander, Spain's largest bank, would take its Italian and Brazilian unit.

Fortis Share Slump
Fortis also sold 2 billion euros of notes last month that would automatically convert to securities tradable for stock, contingent on Fortis shareholders approving the rights issue. The company agreed to sell its stake in a Spanish insurance venture for 980 million euros.

Fortis shares fell 18 percent through yesterday from April 13, the day ABN Amro said it received a letter from the Royal Bank-led group asking for ``exploratory talks.'' ABN Amro's stock rose 5 percent, valuing the company at 67.3 billion euros.

After today's meeting at the Centre for Fine Arts in Brussels, shareholders discussed the vote and sipped on drinks from strawberry juice to Absolut Vodka and Duval-Leroy champagne.

Stichting VSBfonds, which owns about 4.99 percent of Fortis, voted in favor of the plans, said Luuk van Term, a Utrecht-based spokesman for the non-profit organization.

The takeover is ``very good for growth and employment,'' said Gunther Van Sant, a Belgian who owns Fortis shares and voted in favour of the resolutions. ``If this doesn't take place Fortis may end up being a prey itself.''

``I voted in favor of the bid to support the Fortis management,'' said Roger Smets, who manages about 1.2 million euros at the non-profit Belgian Society for Cremation. Smets said he has ``rock-solid'' confidence in management's plans.

Barclays offer may appeal to ABN Amro

Barclays First-Half Net Rises 14% on Securities Unit (Update3)
By Ben Livesey and Jon Menon

Aug. 2 (Bloomberg) -- Barclays Plc, the U.K. bank competing to buy ABN Amro Holding NV, said first-half net income increased 14 percent, helped by record gains in the securities unit.

Barclays's first-half profit rose to 2.63 billion pounds ($5.35 billion), or 40.1 pence a share, from 2.3 billion pounds, or 35.1 pence a year earlier, it said today in a statement. Barclays Capital, the investment bank, increased earnings in July, ``a time of turbulence in the capital markets,'' Chief Executive Officer John Varley said.

The investment bank, which provided 39 percent of total profit, predicts credit markets will be ``challenging for quite a while.'' Barclays sells and invests in securities that package subprime mortgages, which ``will take some time to work out,'' said Barclays President Robert Diamond. U.S. mortgage foreclosures hit a 10-year high after less-credit worthy borrowers defaulted.

``Profits have been driven by excellent profit growth at Barclays Capital, but people are concerned that cannot go on forever,'' said Simon Willis, an analyst at NCB Group in London with a ``buy'' rating on the stock. ``Investors worry that something will come out on subprime that will cost them a meaningful sum of money.''

Shares of Barclays rose 2.1 percent to 691.5 pence at 8:10 a.m. in London, valuing the bank at 45.3 billion pounds. The shares are little changed since March 16, the last trading day before Barclays said it was in talks with ABN Amro.

China, Singapore
Barclays announced first-half pretax profit and division results July 23. Pretax profit at the investment bank rose 33 percent to 1.66 billion pounds, helped by structured credit, derivatives, equities and commodities. Barclays Global Investors, the asset-management unit, increased pretax profit by 7 percent to 388 million pounds.

Singapore's Temasek Holdings Pte and China Development Bank agreed July 25 to buy stakes totaling 9.2 percent in Barclays. The investments will be reduced to 5.2 percent in the event that the ABN Amro takeover doesn't go through.

The partnership with China Development Bank will lift the bank's earnings, Varley said today. ``We believe that the further earnings growth unlocked by that agreement is material, that it creates further exposure to Asia, which fits well with our strategy, and that it will create further benefits for all shareholders,'' Varley said today.

Losing Ground
Barclays has lost ground in the battle to buy ABN Amro in the biggest bank takeover. Barclays's shares are down 4.6 percent since it sweetened its all-stock offer. The new bid, which includes 37 percent cash, was valued yesterday at 65.3 billion euros ($89.3 billion), less than the all-cash bid of 72.1 billion euros from a group led by Royal Bank of Scotland Group Plc.

ABN Amro withdrew its recommendation of the Barclays's bid, saying it is financially inferior to the Royal Bank group's offer. Royal Bank's bidding partners are Fortis, Belgium's largest financial-services company, and Banco Santander SA, Spain's biggest bank.

ABN Amro had backed Barclays since April, in part because the London-based said it would keep the biggest Dutch lender intact. ABN Amro declined to recommend the Royal Bank-led bid, citing ``unresolved questions'' about the group's proposed breakup of the 183-year-old company.

``There is significant dependency on where the share price is'' when ABN Amro shareholders vote on the deal, Varley said on a conference call today with reporters. ``The issue is not where the share price is today.'' He said he is ``confident'' Barclays will succeed in the acquisition.

`In Play'
``If Barclays doesn't buy ABN then it will be perceived as being in play,'' Willis said.

Pretax profit at Barclays's credit card unit fell 17 percent to 272 million pounds as the bank lost money on the sale of its Monument subprime business. U.K. consumer-banking profit rose 8.5 percent to 651 million pounds, while total bad loan charges declined 9.3 percent to 959 million pounds, the company said.

Overseas bank profit declined 12 percent to 452 million pounds as the weaker currency hurt earnings at its Absa unit in South Africa, the company said.

Expenses rose 9.2 percent to 6.85 billion pounds as the company added employees in Barclays Capital, Barclays Global Investors and Absa in South Africa. Revenue rose 8.5 percent to 11.9 billion pounds, lifted by Barclays Capital, the company said.