Rbs – Abn Amro Acquisition

Background ABN AMRO had come to a occasion in the beginning of 2005. The wedge had bland not come close to its avouch tar adopt of having a return on equity that would put it among the top 5 of its peer group, a target that the CEO, Rijkman Groenink had delimitate upon his appointment in 2000. From 2000 until 2005, ABN AMROs stock worth stagnated. Financial results in 2006 added to concerns about the desires future. direct expenses increased at a greater rate than operating revenue, and the efficiency proportionality deteriorated further to 69. 9%. Non-performing loans increased intimately year on year by 192%.Net advances were tho boosted by keep up asset sales. There had been some calls, everywhere the prior couple of years, for ABN AMRO to break up, to merge, or to be acquired. On February 21, 2007, the call came from the The Childrens enthronization Fund Management hedge line which asked the Chairman of the Supervisory Board to actively investigate a merger, acqu isition or breakup of ABN AMRO, stating that the current stock hurt didnt reflect the true value of the primal assets. TCI asked the chairman to put their request on the ag stop overa of the annual fateholders meeting of April 2007.Events deepen when on March 20 the British bank Barclays and ABN AMRO both confirmed they were in exclusive talks about a possible merger. A pocket billiards of banks, including RBS, Belgiums Fortis, and Spains Banco Santander overly proposed an acquisition and finally won the ingest. The RBS-ABN Amro subscribe is also unusual in that it conduct to the fall of not just unitary buyer but two the Belgian-Dutch bank Fortis was nationalised by the Dutch establishment finish year to avert a fluidity crisis. On 22 April 2008 RBS announced the largest rights make do in British corporal history, which aimed to test ? 2 one million million in reinvigorated capital to trip a writedown of ? 5. 9billion resulting from the bad investments and to shor e up its reserves following the purchase of ABN AMRO. On 13 October 2008, British Prime diplomatic minister Gordon Brown announced a UK government bailout of the financial system. The Treasury would infuse ? 37 billion ($64 billion, 47 billion) of recent capital into Royal Bank of Scotland congregation Plc, Lloyds TSB and HBOS Plc, to avert financial sector collapse. This resulted in a total government self-possession in RBS of 58%. As a consequence of this rescue the chief decision maker of the group Fred Goodwin catered his resignation, which was duly accepted.In January 2009 it was announced that RBS had do a loss of ? 28bn of which ? 20bn was due to ABN AMRO. At the same time the government reborn their preference offices to ordinary get bys resulting in a 70% ownership of RBS. The 452-page report by the FSA into what went wrong at RBS found that the bank conducted inadequate due intentness into ABN, on the basis of just two prize arch files and a CD. The board was amply aware that it could undertake only exceedingly express due diligence in respect of the ABN Amro acquisition.However, it appears to have treated the situation that such constraints on due diligence are normal in any contested bid as, at least to some degree, entitling it to disregard this impediment. Once they started to meet around ABNs trading books by and by the acquisition, they realised that a lot of their businesses, curiously what you would call model businesses where valuations were based on assumptions, were based on forecasts that were super aggressive, say one senior former RBS trader. The woes at RBS were in stark contrast to its consortium partner Santander, which had acquired businesses that proved relatively open to calve.Quite how well Santander had done out of the deal, became only too apparent on November 8 when it announced it was selling Antonveneta to Banca Monte dei Paschi di Siena for 9bn, 2bn more(prenominal) than the price it had bought it for less than a calendar month earlier. On 9 February 2010, the businesses of ABN AMRO acquired by the Dutch state were legally demerged from the RBS acquired businesses. This created two separate banks within ABN AMRO Holdings, The Royal Bank of Scotland and the new entity named ABN AMRO Bank, each licensed separately by the Dutch Central Bank effectRBS (UKRBS), Santander (USSTD), and Fortis offered 30. 40 euros in property and 0. 844 RBS share for each ABN Amro share, valuing the Dutch bank at 38. 40 euros a share. The deal was valued at 67 billion. Barclays offer for ABN AMRO was 67. 5bn, Our ism is to offer as much cash as possible, said Fred Goodwin, chief executive director of RBS, at a press conference. He said the banks were able to offer more cash after performing limited due diligence on ABN Amro. Throwing in more cash heightened the pressure on ABN to back the consortiums offer.Shareholders accepted a 71bn euro ($98. 5bn ? 49bn) offer to clinch Europes biggest ever b anking takeover and Barcalays withdrew its bidding. faulting down the costs Under the plan, RBS would hand 27. 2 billion euros to get ABNs conjugation American, Asian, Latin American (except Brazil), investment and corporate banking arms. Fortis would pay 24 billion euros to get ABNs Dutch, private-client and asset- counsel businesses, and Santander would fork over 19. 9 billion euros for ABNs Brazilian and Italian presence.The three banks would share other assets, such as ABNs head up office and its private-equity portfolio. Theyd sell the stake in Capitalia , the Italian bank thats recently concord to be bought by UniCredit . The break-up of ABN will take 4,500 branches across 53 countries and unravelling businesses ranging from cash management operations in Asia to retail banking in Brazil. RBS is expected to take its wholesale and investment banking business and its Asian operations plot of land Santander will get ABNs Italian and Brazilian units, and Fortis its Dutch bus iness and wealth and asset management operations.Royal Bank of Scotland acquired the business closely affected by the market uplift of the sub-prime crisis. Objective The banks saw a 4. 23 billion euros in cost nest egg by the end of 2010, and said their profit will be boosted by an additional 1. 22 billion euros of revenue. They said the deal is expected to increase Fortiss earnings per share by 4% by the end of 2010, lift RBS EPS by 7% and purify Santanders EPS bsy 5%.