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Barclays attracts interest in parts of ABN Amro

European Market News

Friday 20th April 2007

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Barclays has received interest from rivals if it wants to sell parts of ABN AMRO, a source familiar with the matter said, as the UK bank heads towards a deal with its Dutch target early next week.

But late on Thursday a consortium of Royal Bank of Scotland , Spain's Santander and Belgian-Dutch group Fortis hit back at criticism of their possible counterbid and said their intentions for ABN are "straightforward from a shareholder, regulatory and execution perspective."

RBS said in a statement the trio will clarify their intentions at a meeting with ABN on Monday, confirming a Reuters report on Wednesday.

ABN and Barclays this week extended a period of exclusive talks until Friday and may unveil an agreement early next week, possibly on Monday, sources familiar with the situation said.

The RBS-led consortium said it welcomed the opportunity to present their proposals so they can be considered by ABN's board alongside any proposal by Barclays.

A takeover of ABN would be the world's biggest bank acquisition, worth more than 68 billion euros ($NZ125.2 billion) at current values.

If Barclays wants to sell ABN assets, rivals including BBVA , Bank of America and BNP Paribas are interested in buying parts, the source said.

Barclays may sell some of ABN's larger assets, most likely its US bank LaSalle, to enable it to offer a higher price for ABN and pay more in cash, a source told Reuters last month.

Barclays Chief Executive John Varley told employees that talks were progressing and a deal would be "a great outcome", but he would walk away from a deal if necessary.

"We are examining the ABN AMRO combination from a position of strength, and that means if we choose to walk away, we can," Varley said in comments filed with US regulators late on Wednesday.

Banks including BBVA, BNP and ING have for some time been interested in parts of ABN, sources have said.

The Wall Street Journal said on Thursday that BBVA, BNP and Bank of America were in contact with Barclays at high levels to say they are standing by for assets.

Ian Gordon, analyst at Dresdner, said in a note that their interest in cherry picking assets was not new and "while not part of Barclays' central plan, it could help to make the maths more tolerable for a 35-36 euro (per share) bid."

A sale of LaSalle would probably fetch around $US20 billion. Barclays is less likely to sell ABN's Brazilian or Italian businesses, the first source said.

Barclays declined to comment on whether it would sell any assets or on the progress of talks.

BBVA declined to comment, but a source said the bank was currently focused on integrating its recent purchases in the United States.

ABN shares closed down 1% at 35.8 euros, extending the previous day's slide as dealers said the chances of a higher, successful consortium bid had dimmed.

Barclays, RBS and Santander shares each dipped just under 1% and Fortis fell 1.5%, in a weak European market.

Barclays was likely to pitch any offer for ABN at about 35 euros per share, according to the median forecast from a poll of analysts by Reuters this week.

But analysts at Fox-Pitt Kelton said any bid by Barclays above 33 euros per share would result in "ABN shareholders walking away with most of the spoils."

The RBS-led consortium could afford to pay nearer 38-40 euros per ABN share, as it could extract greater cost savings, but its interest is complicated by political, social, operational and other issues, Fox-Pitt said.

"Therefore we still believe that Barclays is slightly ahead in the race to win ABN," it said in a note.

ABN and Barclays entered merger talks last month after ABN came under pressure from investors, including British hedge fund TCI, to consider a sale or breakup, and last week the RBS-led consortium asked the Dutch bank to consider takeover talks.

The consortium had a setback on Wednesday when the Dutch central bank said any takeover attempt would entail "strong risks and complications", but the European Commission on Thursday warned the Netherlands not to discriminate on any bids.

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