For shoving awkward sticks into the machinery, Peter Paul de Vries has no equal. The director of the Dutch private shareholders’ lobby group VEB has already played a starring role in the €70 billion (£47 billion) ABN Amro bid battle, successfully questioning the legality of a key $21 billion (£10.4 billion) side deal. The Dutch Supreme Court rules on that one tomorrow. Its judgment will be pivotal for Barclays, ABN’s preferred merger partner, and for the rival Royal Bank of Scotland consortium.
Now in a fresh filing with a lower Dutch court, Mr de Vries has demanded that three independent supervisors be installed on the ABN board, a move that will certainly be challenged by ABN if he wins the first skirmish, and could therefore delay the entire sale process by three to six months.
Mr de Vries is certainly getting his voice heard. Whether he is doing even his own members any favours is more questionable. The agitation may ensure a fairer sale of the Dutch bank but the delay is unlikely to improve the quality of assets on offer. The tens of thousands of ABN and Barclays staff whose lives and livelihoods will be affected, not to mention the clients, do not need more uncertainty. Putting VEB’s latest missile to one side, the RBS consortium is now contemplating the possibility of defeat in the Supreme Court. The senior adviser to the court has already recommended that LaSalle can be sold without a shareholder vote. RBS, Banco Santander of Spain and Fortis of Belgium have to decide what to do if the judges agree.
If they do go ahead with a bid for ABN ex-LaSalle, they need to revisit the way the cost is divvied up. For RBS, the deal becomes much less of a must-do. LaSalle was the main prize. Without it, RBS stands to pick up a second-division wholesale bank, admittedly with some plum Dutch corporate clients, plus a smattering of sub-scale retail operations in Asia and Latin America.
It is not the most enticing of acquisitions. Depending on whose figures you take, the ABN assets earmarked for RBS together made after-tax profits of between €412 million and €503 million last year. If RBS were to stick with the existing deal structure, but subtract the $21 billion LaSalle price tag from its contribution, it would be chipping in €11.7 billion for this rag-bag of assets. That equates to a multiple of up to 28 times earnings, which is pricey by anyone’s standards.
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Even allowing for the sizeable synergies RBS reckons it can squeeze from ABN’s wholesale bank, the maths looks tougher to justify than when LaSalle was in the equation. There is also the loss to RBS of missing out on the benefit to its balance sheet of LaSalle’s excess capital – a key attraction of the original deal, though hard to quantify. Meanwhile, RBS would still be lumbered with the added responsibility as primus inter pares for keeping the regulators happy.
RBS needs to renegotiate with its partners. Fortis, which was busy yesterday climbing the first foothill in a €15 billion capital-raising mountain, looks fully stretched already. Santander, by contrast, might be able to budge a little. So far it seems to have scooped exactly what it wants from the deal and for a relatively good price. It is getting two plums – in Brazil and Italy – and has even managed to snaffle a Dutch consumer finance business it had its eye on as its share of the spoils.
Maybe the Supreme Court will come up with a surprise ruling that means LaSalle can be salvaged for RBS. If not, however, the consortium partners are faced with difficult negotiations among themselves. If anyone has room to concede a little in a reworked deal, it is the Spanish.