The Acquisition of ABN AMRO (A)

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Case Details:

Case Code : BSTR345
Case Length : 20 Pages
Period : 2007
Pub Date : 2009
Teaching Note :Not Available
Organization : ABN AMRO / Royal Bank of Scotland / Fortis / Banco Santander Central Hispano
Industry : Banking / Financial Services
Countries : UK, Belgium, Spain, The Netherlands

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"Once the celebration is over, the real challenges involved in this acquisition will have to be faced. Chopping a large international bank like ABN AMRO... will not be an easy task, especially from an operational point of view."¹

- Axel Pierron, Analyst, Celent Financial Consultants², in October 2007.

"The Royal Bank-led offer is a very expensive transaction. The risk-reward doesn't add up."³

- Robert Talbut, Chief Investment Officer, Royal London Asset Management⁴, in October 2007.

"The acquisition of the ABN AMRO businesses remains compelling from a financial point of view, as evidenced by the fact that it produces essentially the same earnings enhancement for the group, despite the smaller size of the transaction."⁵

- Fred Goodwin, Chief Executive Officer, RBS Group, in July 2007.

Introduction

On October 10, 2007, Royal Bank of Scotland (RBS) led consortium consisting of RBS, Fortis of Belgium and Banco Santander Central Hispano SA of Spain (Santander) created history by acquiring Dutch banking giant ABN AMRO for US$ 100 billion⁶.

The consortium paid US$ 51.55 per share of ABN AMRO, about 13 percent more as compared to the rival Barclays'⁷ offer. This was one of the largest acquisitions in the history of the global banking industry⁸. The consortium agreed to pay 93 percent of the acquisition amount in cash and the remaining seven percent through RBS shares.

The Acquisition of ABN AMRO (A) - Next Page>>

1] Roland Jackson, Ben Perry, "RBS Consortium Seals ABN Amro Takeover, as Chairman Quits," Yahoo Finance, October 10, 2007.
2] Celent Financial Consultants is a Boston; US based research and consulting firm, which focuses on the application of information technology in the global financial services industry. It provides research and consultancy services to the clients.
3] Jon Menon, Ben Livesey. "Group Led by Royal Bank of Scotland Wins Control of ABN AMRO," International Herald Tribune, October 09, 2007.
4] Royal London Asset Management (RLAM) is the wholly owned asset management subsidiary of The Royal London Mutual Insurance Society (RLMIS). RLMIS is the second largest mutual life insurer in the UK. RLAM was established as a separate company in 1988 to manage the Royal London Group's assets. It manages investment assets for a range of both internal and external clients. These include the Royal London Group, institutions such as pension funds, charities and universities and private individuals.
5] James Kanter, "Royal Bank of Scotland Group Raises Offer to ABN Amro," International Herald Tribune, July 16, 2007.
6] Exchange Rate 1€ = 1.4064 US$ as on October 10, 2007.
7] UK-based Barclays Plc. is a financial services provider with interests in retail banking, commercial banking, credit cards, investment banking, wealth management and investment management.
8] In 1988, the US based Travelers Group bought Citigroup for US$ 72.56 billion, which was the largest acquisition in the global banking industry till the recent acquisition of ABN Amro by RBS led consortium.

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