ABN Amro and Barclays agree on merger

ABN Amro and Barclays on Monday announced that they have agreed on a merger via an exchange of shares.

The British bank is offering 3.225 Barclays shares for each stake in ABN Amro, which comes to 36.25 euros a share, the two banks said in a joint statement on their websites.

The bid values the Dutch bank at 67 billion euros, making the takeover the largest ever in Europe's financial sector.

Meanwhile, ABN Amro will sell its U.S. unit LaSalle Bank to Bank of America Corp. for 21 billion U.S. dollars in cash. This sale will take place as planned even if the merger is unexpectedly unsuccessful.

The new combination, to be called Barclays PLC, will have its head office in Amsterdam, the statement said.

In their joint statement, the Managing Board and Supervisory Board of ABN Amro and the Board of Directors of Barclays said that they expect the merged to "generate significant and sustained future incremental earnings growth for shareholders," and they "unanimously resolved to recommend the transaction to its respective shareholders."

The proposed merger will create "a leading force in global retail and commercial banking, with world class products," the statement said.

The new combination will become "a premier global investment bank", "the world's largest institutional asset manager," and "the world's eighth largest wealth manager," the statement said.

The group will have a British corporate governance structure with a unitary board. Arthur Martinez, chairman of ABN Amro's supervisory board, will be the chairman; Barclays' John Varley will be the chief executive officer; and Bob Diamond will be president.

The new board will initially consist of 10 members from Barclays and 9 members from ABN Amro.

Barclays will be the holding company for the combined group. Barclays existing ordinary shareholders will own approximately 52 percent of the combined group, and ABN Amro existing ordinary shareholders will own approximately 48 percent.

The merger, expected to be concluded in the fourth quarter of this year,will also affect the personnel at both ABN Amro and Barclays. Out of the combined work force of 217,000, about 10,800 jobs will be moved to low-wage countries and 12,800 jobs will be shed.

Rijkman Groenink, ABN Amro's CEO for the last seven years, was not mentioned in the statement. Groenink said he would move to a non-executive directorship position.

Major shareholders have complained that during his tenure the bank's share price had underperformed.

Groenink said the bid from Barclays was "in the best interest of shareholders." He said the British bank is the best partner for ABN Amro.

Although having reached a deal with Barclays, ABN Amro said it will still meet with representatives from the Royal Bank of Scotland PLC, Spain's Banco Santander Central Hispano SA and Belgian-Dutch bank Fortis NV, which invited ABN Amro to enter talks earlier this month.

The consortium intends to break up ABN Amro with each of the three buying parts of its operations. The offer could be higher than Barclays' and more attractive for shareholders.

ABN Amro, which prefers to keep its operations together rather than a split-up, entered into exclusive merger talks with Barclays in March.

Analysts say Monday's announcement does not mean the merger is something of a certainty, and investors are still counting on a higher bid.

ABN Amro's share opened 1.4 percent higher on Monday on the Euronext stock market in Amsterdam.

Source: Xinhua