British bank Barclays Plc has agreed to buy Dutch rival ABN AMRO for about 67 billion euros ($91 billion) in shares as it fights off rivals to clinch the world's biggest bank takeover.
Barclays said on Monday that it would pay 3.225 new shares for each ABN share, equivalent to 36.25 euros a share at Friday's closing price but less than that on Monday, to create the world's fifth biggest bank, with a market capitalisation of over $190 billion and 47 million customers across the globe.
The deal is widely seen as a test case for larger bank mergers in Europe's consolidating banking and financial sector, and part of a wave of mega-bank mergers that began in the United States several years ago.
Barclays also agreed to sell ABN's Chicago-based US bank LaSalle to Bank of America for $21 billion in cash, conditional upon its purchase of ABN.
The two banks said a merger would result in 3.5 billion euros of annual synergy benefits, largely from cost cuts, including 23,600 job reductions or just over 10 per cent of the combined workforce. Just under half of the positions being cut will move offshore.
The price tabled by Barclays is broadly in line with what analysts had expected the bank to offer and represents a 33 per cent premium to ABN's price before the banks announced talks, though some analysts said on Monday it was too low.
"It's a dream fit," Barclays Chief Executive John Varley told reporters at an Amsterdam news conference.
Asked if he was willing to pay more Varley said, "We have put a good price to ABN shareholders."
There is a chance of a higher bid from a rival trio of suitors--led by Royal Bank of Scotland (RBS) backed by Spain's Santander and Dutch-Belgian group Fortis, is due to meet ABN later on Monday.
ABN Chairman Rijkman Groenink told reporters the ABN board would hear other offers but said a Barclays merger was the "best option" for shareholders.
That does not mean we do not listen to shareholders, if they think there is something else very serious and more compelling on the table," he told reporters on a conference call.
The banks will distribute about 12 billion euros to shareholders through buybacks after the sale of LaSalle.
Analysts said the offer may be too low to secure a win or exclude another bidder, who could extract greater cost savings.
"I still believe the better owner of those assets looks like the RBS-Santander-Fortis consortium, so I think this bid has relatively low likelihood of winning," analyst Alex Potter at Collins Stewart said.
At 1000 GMT Barclays shares were down 1.8 per cent at 737 pence, cutting the value of the offer, as traders said hopes were fading it would itself become a takeover target.
ABN entered talks with Barclays after coming under pressure from investors, including British hedge fund TCI, to consider a sale or break-up to boost shareholder returns after several years of underperformance.
TCI said in a brief statement it was studying the terms of the Barclays/ABN deal and might comment further in due course.
A plan for the Dutch Central Bank to be lead regulator has been dropped and Britain's Financial Services Authority is now favoured for that role.
On job cuts, Dutch trade union De Unie, representing about 2,500 ABN AMRO employees, said they were told by the ABN management that most cuts would come in Britain, Spain and Italy and that several hundred Netherlands-based jobs would be lost.