LONDON (Reuters) - Barclays said it may add cash to sweeten its agreed 65 billion-euro (44 billion pound) offer for ABN AMRO as it battles against a higher bid from a rival consortium.
Barclays said on Thursday it had been given an extension by the Dutch markets regulator to August 6 to launch its formal offer — the same day as a key vote by investors in Fortis, a member of the rival consortium, to approve its plans.
Barclays’ current all-share bid has been recommended by ABN’s board, but the Dutch bank is coming under pressure to switch support to a higher, mostly cash offer from a group of Royal Bank of Scotland, Fortis and Santander.
“Barclays is considering possible alternative offer structures, including introduction of a partial cash consideration element into the offer,” Britain’s third-biggest bank said in a statement.
It said no decision had been made and any changes would meet “the strict financial criteria” it applies to acquisitions.
By 10:30 a.m., Barclays shares were up 0.4 percent at 731 pence, while ABN shares were up 0.7 percent at 37.13 euros.
Sources familiar with the matter had told Reuters earlier this week that Barclays was considering its options after the RBS-led consortium sweetened its 71 billion-euro bid for ABN to include 93 percent cash.
The consortium is offering 38.4 euros per ABN share, around 10 percent above Barclays’ bid worth about 35 euros per share.
Any deal for ABN would be the world’s biggest bank takeover.
Analysts said Barclays appeared to be testing the water, aware that if it raises its offer its shares could fall and reduce the deal’s value.
“This is game theory at its best,” said Mamoun Tazi, analyst at Man Securities. “They should be sending messages and seeing how the market responds and testing the water as much as they can.”
Barclays is unlikely to be able to get anywhere near to the cash on offer from the consortium, but adding some cash and lifting its offer could win round hedge fund investors who have built up a sizeable position in ABN, analysts said.
One option would be to return the proceeds from the sale of ABN’s U.S. arm LaSalle Bank, estimated to be 12 billion euros, directly to ABN shareholders, rather than use it to buy back shares in the enlarged group, analysts said.
Barclays could also gear up its balance sheet, which could free up over 5 billion more in cash, and sell off ABN assets such as its stake in Saudi Hollandi, but it would struggle to get much above 20 billion euros in cash, analysts said.
“It would be better to stick to what they have and put the merits of what they have forward, which is an all-share deal that means ABN shareholders will share the upside with Barclays shareholders. If that doesn’t work they will need to improve the deal,” Man’s Tazi said.
But Barclays will struggle to reach a balance between winning over its own shareholders and those of ABN, which means the consortium is likely to win the takeover, according to a survey released by stockbroking firm Execution on Wednesday.
Execution said the survey showed Barclays needed to make at least half its offer in cash to swing support its way, which it said appeared unachievable.
Barclays said regulatory reviews around the world, including in the United States, relating to the takeover were not yet complete so the Dutch markets regulator had agreed to extend the deadline on launching its offer from July 23 to August 6.
On the same day, Fortis shareholders will vote to approve the raising of 13 billion euros in cash. The rights issue requires approval from 75 percent of shareholders and may be a close call, analysts said.
Additional reporting by Mark Potter and Dan Lalor in London and Gilbert Kreijger in Amsterdam