The verdict, expected towards the end of July, will determine how the two bidding camps – Barclays and the group led by Royal Bank of Scotland – proceed thereafter, because it will legitimise or otherwise the planned sale of ABN Amro’s Chicago-based bank LaSalle. This division is coveted by RBS and therefore crucially affects the overall attractiveness of the group and the amount it is willing to pay.
But while attention has strayed elsewhere, Barclays has begun subtly to reposition itself. Its core problem is that the market thinks it cannot afford to pay as much as the RBS-led consortium, so if the matter is to be settled purely on price then Barclays will lose. While it could find the money to match RBS and its allies, its shareholders would be unwilling to allow it to weaken itself by getting into a bidding war where it conspicuously over-paid. The RBS Santander and Fortis consortium can automatically pay more, because they will integrate ABN’s operations in their different countries and therefore have much greater scope for cost savings compared to Barclays, which proposes to keep most of the Dutch bank intact.
Barclays is no longer arguing that price should be the determining factor in deciding to bid. In an interview with the Financial Times, it put forward Bob Diamond, the head of its investment bank Barclays Capital, to argue that the competing bidders should be judged on what they would do with the bank going forward, rather than which offers the highest price now.
Shareholders should look three to five years ahead and choose a winner on the basis of which bidder is the more likely to generate strong growth from ABN Amro’s under-managed assets and which would therefore deliver the bigger benefit to shareholders over the longer term.
Barclays has therefore sought to shift the battle to ground where it thinks it has an edge, moving the argument from short-term wallet size to long-term management quality. Being financially out-gunned it may have had little choice, but it will nevertheless be a brilliant PR coup if it works.