Barclays Abn Amro Deal Presentation

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Barclays Abn Amro Deal Presentation

  1. 1. The ABN AMRO Deal ANIRBAN RAY SUMIT THAWRANI A MONETRIX PRESENTATION
  2. 2. What sparked it off? ABN AMRO was seen as a takeover target for years because of its underperforming share price, but rival banks were deterred by its mix of businesses, which was unattractive to any single bidder. Rijkman Groenink, ABN AMRO CEO has been under pressure to raise ABN AMRO's share price, and investors criticized a string of failed acquisition attempts and the bank's lack of focus. The pressure intensified when The Children's Investment Fund , known for buying minority stakes in companies and then forcing the management to change its strategy, asked ABN AMRO to either to put itself up for sale or split itself up. The bank's shares jumped to a record following the announcement.
  3. 3. March 20 April 13 April 23 April 25 July 23 July 30 July 16 May 7 May 29 May 5 Barclays and ABN outline the plan for a potential merger. Royal Bank of Scotland (RBS) Spain's Santander and Belgian-Dutch group Fortis approach ABN AMRO. Barclays agrees to buy ABN in a recommended all-share deal, ABN will sell LaSalle to Bank of America for $21 billion. RBS, Santander and Fortis propose a cash-and-share offer for ABN worth about $98 billion RBS consortium offer worth $24.5 billion for LaSalle, conditional on buying the rest of ABN. ABN rejects the RBS consortium offer for LaSalle The RBS-led consortium bid for ABN valued at 38.40 euros per share, worth a total $95.7 billion The RBS-led consortium improves its bid for ABN, raising the cash component to 93 percent from 79 percent before. Barclays raises its offer for ABN AMRO, to 67.5 billion euros , include a cash element. (35 euros per share) ABN AMRO withdraws its recommendation of a takeover by Barclays. ABN AMRO Deal : IMPORTANT TIMELINES August 29 Barclays Bid falls to €59bn in value, with speculation regarding credit crisis at Sachsen Landesbank
  4. 4. The Key Players <ul><li>One of the world’s largest banks with total assets of EUR 632.8 billion </li></ul><ul><li>Presence in more than 3,000 locations in over 60 countries </li></ul><ul><li>ABN AMRO is the result of the merger in 1991 of Algemene Bank Nederland (ABN) and the Amsterdamsche-Rotterdamsche Bank (AMRO). </li></ul><ul><li>ABN AMRO is organized into three autonomous strategic business units </li></ul><ul><ul><li>responsible for managing wholesale clients </li></ul></ul><ul><ul><li>consumer and commercial clients </li></ul></ul><ul><ul><li>private clients and asset management </li></ul></ul><ul><li>The English bank began operations in the 17th century in London, but has since then become a strong entity in 60 countries. </li></ul><ul><li>Barclays has grown into an international bank with 800 global branches </li></ul><ul><li>Barclaycard is the leader in the issue of credit cards in Europe </li></ul><ul><li>Barclays Global Investors were one of the very first asset management companies in the world </li></ul><ul><li>Barclays Capital is an investment bank well-known for the services it offers </li></ul><ul><li>Barclays plc is the 4th largest financial services provider in the world by Tier 1 capital ($32.5 billion) </li></ul>
  5. 5. <ul><li>World's fifth largest bank founded in 1727 </li></ul><ul><li>RBS's activities cover account management, savings, loans and credit cards and insurance. </li></ul><ul><li>Leading corporate and institutional bank with global product strengths </li></ul><ul><li>Global leader in securitization, structured and leveraged finance, </li></ul><ul><li>FX and financing and risk management products </li></ul><ul><li>Established in 1990 and has strong footprint in Europe with over 2,500 branches </li></ul><ul><li>A banking, insurance, and investment management company, and is the 20th largest business in the world by revenue </li></ul><ul><li>Top 20 worldwide in assets under management from high net worth individuals with a total AUM of USD 500 billion </li></ul><ul><li>Total revenue around USD 96 billion </li></ul><ul><li>More than 10 million retail banking clients </li></ul><ul><li>The bank's market capitalization was EUR 88,436 million at the </li></ul><ul><li>end of 2006, making Santander </li></ul><ul><li>the world's 12th largest financial </li></ul><ul><li>group by market value. </li></ul><ul><li>Europe covers all retail banking, asset management, and insurance </li></ul><ul><li>United Kingdom focuses on </li></ul><ul><li>retail banking and insurance </li></ul><ul><li>The Latin America includes financial activities conducted via </li></ul><ul><li>the Bank's subsidiaries </li></ul>The Consortium : Key Players
  6. 6. LaSalle Bank <ul><li>Subsidiary of Netherlands-based ABN AMRO Bank headquartered in Chicago </li></ul><ul><li>More than $106.6 billion in assets </li></ul><ul><li>Centerpiece of ABN AMRO’s US operations since its acquisition nearly 30 years ago </li></ul><ul><li>Sale of LaSalle Bank to Bank of America </li></ul><ul><li>The Deal was valued at USD 21 billions </li></ul><ul><li>LaSalle represents a unique and important strategic opportunity for Bank of America in augmenting its unparalleled business platform in the US </li></ul><ul><li>The sale of LaSalle is expected to complete late 2007 and is subject to regulatory approvals and other customary closing conditions. </li></ul><ul><li>The management of the combined group is expected to distribute EUR 12 bn to the shareholders of the combined group in a tax efficient form, primarily through buy-backs after completion of the offer </li></ul>
  7. 7. The Bid from Barclays
  8. 8. Components of the Transaction <ul><li>3.225 new Barclays shares for each ABN AMRO share, with an equivalent value of €36.25 per ABN AMRO share </li></ul><ul><li>Ownership of the combined entity will be 52% to Barclays shareholders and 48% to ABN AMRO’s shareholders </li></ul><ul><li>Regulatory & Tax Clearances </li></ul><ul><li>Sale of LaSalle Bank </li></ul><ul><li>Completion of employee consultations </li></ul><ul><li>UK Incorporation, HQ in Amsterdam and UK FSA lead regulator </li></ul><ul><li>LSE primary listing, Euronext Amsterdam & Tokyo Stock Exchange secondary listings with NYSE listing for new Barclays ADSs </li></ul><ul><li>€ 3.5bn (£2.37bn) of pre-tax synergies </li></ul><ul><li>5% cash earnings per share accretion </li></ul><ul><li>Return on investment of 13% by 2010 </li></ul>Key Terms Conditions Structure & Listing Financial Returns
  9. 9. Deals related to the Merger <ul><li>China Development Bank (CDB) -Barclays </li></ul><ul><li>CDB has paid 2.2 billion euros for 201.39 million Barclays shares at a price of 7.2 Pounds/Share </li></ul><ul><li>The purchases give CDB a 3.1 percent stake in Barclays' existing share capital </li></ul><ul><li>Temasek -Barclays </li></ul><ul><li>Temasek has paid 1.4 billion euros for 135.42 million Barclays shares at a price of 7.2 Pounds/Share </li></ul><ul><li>The purchases give Temasek a 2.1 percent stake in Barclays' existing share capital </li></ul><ul><li>The funds are additional capital for Barclays' ongoing bid for Amsterdam-based ABN AMRO. Under the deal, if Barclays outbids its competitor Royal Bank of Scotland (RBS) and wins ABN AMRO, CDB will make a further investment in Barclays of up to 6.34 billion euros. </li></ul>
  10. 10. Financial Highlights of the Deal <ul><li>33% premium on the share price of ABN AMRO ordinary shares as on 16 th March 2007. </li></ul><ul><li>Total Synergies = €3.5bn by 2010 </li></ul><ul><li>- Cost = €2.8bn </li></ul><ul><li>- Net Revenue = €0.7bn </li></ul><ul><li>- Implementation Costs = €3.6bn </li></ul><ul><li>Target Equity Tier I ratio of 5.75% </li></ul><ul><li>13% by the year 2010 </li></ul><ul><li>5% accretive in 2010 for Barclays shareholders </li></ul><ul><li>Significantly accretive to ABN AMRO shareholders in 2008 </li></ul>Premium Synergies Capital Barclays ROI Cash EPS Accretion
  11. 11. Global Retail and Commercial Banking <ul><ul><li>• Offer leading products to rapidly growing attractive client segment </li></ul></ul><ul><ul><li>• Expand distribution through enlarged network </li></ul></ul><ul><ul><li>• Barclays is a leading international card issuer </li></ul></ul><ul><ul><li>• Enlarged customer base and network offer substantial growth opportunities </li></ul></ul><ul><ul><li>• Improved cost and revenue per card performance is expected to result </li></ul></ul><ul><ul><li>• ABN AMRO infrastructure is market-leading </li></ul></ul><ul><ul><li>• Barclays offers substantial network extension and strong client relationships </li></ul></ul><ul><ul><li>• Significant opportunity to grow Barclays share in UK Business Banking trade finance market </li></ul></ul><ul><ul><li>• Exploit the ability to expand global merchant acquiring network </li></ul></ul><ul><ul><li>• Cross-sell wealth management products to SME owners and managers </li></ul></ul>
  12. 12. Investment Banking The markets are large and highly fragmented, providing significant opportunity for growth and Combination will add incremental growth
  13. 13. Investment Management
  14. 14. Total synergies of €3.5bn (£2.37bn) by 2010: €2.8bn cost-related and €0.7bn in net revenue synergies Expected Total Synergies by Year (€m) Expected Total Synergies by Business (€m)
  15. 15. Cost Synergies: 5 Major Areas have been identified 5.0% 1610 Headcount Rationalization 1.6% 520 IT Platform / Software Consolidation 0.9% 290 IT Infrastructure (Networks/Hardware) 8.7% € 2800m Total 0.5% 160 Property 0.7% 220 Project Integration / Discretionary Spend % of combined 2006 cost base € m Initiative
  16. 16. <ul><li>Global Retail & Commercial Banking </li></ul><ul><li>Operational Efficiencies – includes move to ABN off shoring model, improved purchasing & property management (around €450million in savings) and reduction in consulting and advisory fee </li></ul><ul><li>Global Product Solutions – Integrate cash management, trade finance & payments into ABN AMRO’s Global transaction banking and all Card operations under Barclaycard </li></ul><ul><li>IT – Integration of Global Technology Platforms, reduction in application development & maintenance costs and rationalize network & data centers. </li></ul><ul><li>Net Revenue benefits – </li></ul><ul><li>1) Leverage ABN AMRO's platform in cash management & trade finance, by putting the Barclay volumes through it </li></ul><ul><li>2) By leveraging in the Barclaycard platform & scale economies, increase ABN AMRO’s revenue/card </li></ul>Synergy Split
  17. 17. <ul><li>Investment Banking </li></ul><ul><li>Cost Synergies – </li></ul><ul><li>Migrate ABN AMRO wholesale activities onto Barclays Capital platforms </li></ul><ul><li>Streamline overlap in front offices in the US, UK, Europe & Asia while combining back and middle offices. </li></ul><ul><li>Net Revenue Synergies – </li></ul><ul><li>Leverage BarCap / Global market products through the expanded retail network </li></ul><ul><li>Strengthen & broaden product capabilities across combined client base </li></ul>Synergy Split
  18. 18. <ul><li>Investment Management </li></ul><ul><li>Achieve higher productivity through greater distribution strength </li></ul><ul><li>Cost Synergies – </li></ul><ul><li>In Asset management, Liquidity Fund management to be transferred to Barclays & also remove other functional overlap </li></ul><ul><li>Eliminate overlap in private client product manufacturing </li></ul><ul><li>Eliminate duplication of branches in Europe & Asia and optimize IT platforms </li></ul><ul><li>Net Revenue Synergies – </li></ul><ul><li>Enhanced product offering & distribution scale will drive higher penetration </li></ul><ul><li>Increased retail network distribution of BGI products, like Exchange Traded Funds; also structured lending & structured products </li></ul>Synergy Split
  19. 19. <ul><li>Corporate Centre </li></ul><ul><li>Single group headquarters located in Amsterdam </li></ul><ul><li>Barclays & ABN AMRO have similar approaches, with both focused on governance & control </li></ul><ul><li>Synergies driven by FTE reduction, IT savings and lower project related costs </li></ul><ul><li>Functional activities decentralized to business divisions: legal, treasury, risk, finance, HR, with governance retained at the group center </li></ul><ul><li>Overlap of major initiatives such as BASELII etc </li></ul>Synergy Split
  20. 20. The Bid from The Consortium
  21. 21. Key Highlights of the Consortium Bid
  22. 22. <ul><li>Italy </li></ul><ul><li>ABN AMRO Antonveneta is a strong franchise in an attractive market </li></ul><ul><li>Potential improvement in commercial performance e.g. mortgage lending, consumer finance, mutual funds </li></ul><ul><li>Brazil </li></ul><ul><li>Benefiting from economies of scale, creates a top 3 bank by network and loans </li></ul><ul><li>High geographical and product complimentarity between both franchises (Banco Real and Santander Banespa) </li></ul><ul><li>Strengthen Benelux Core Competencies </li></ul><ul><li>Market Leader with more then 10 Million customers </li></ul><ul><li>#1 in Benelux Retail & Commercial banking </li></ul><ul><li>Superior Customer reach & skills </li></ul><ul><li>Expansion of Asset management growth platform </li></ul><ul><li>Top tier asset manager with €300bn AUM </li></ul><ul><li>Larger geographic footprint </li></ul><ul><li>Enhanced offering to 3 rd party distributors </li></ul><ul><li>3 rd Largest European Private bank </li></ul><ul><li>Strengthen RBS’s platform for growth outside UK </li></ul><ul><li>Complementary & overlapping business </li></ul><ul><li>Citizens + LaSalle </li></ul><ul><li>RBS + ABN AMRO Retail Business </li></ul><ul><li>RBS Global Banking Markets + ABN AMRO Global Wholesale Business </li></ul><ul><li>Accelerates delivery of RBS objectives </li></ul><ul><li>Strong position with US mid-corporates </li></ul><ul><li>Global reach in corporate & institutional banking </li></ul><ul><li>Expand presence in Asia Pacific </li></ul>Consortium – Strong Combined Business
  23. 23. Transaction Benefits to the Consortium Cost Savings = €4228m Revenue Benefits = €1215m Driving Force for the BID
  24. 24. <ul><li>Clear Integration Plan -€810m </li></ul><ul><li>Improve Standalone Efficiency - €305m </li></ul><ul><li>IT Migration - €105m </li></ul><ul><li>Integration of Operations - €40m </li></ul><ul><li>Head office Integration - €70m </li></ul><ul><li>Full Merger / Network Optimization - €135m </li></ul><ul><li>Cost Synergies -> €700m </li></ul><ul><li>Revenue Synergies -> €110m </li></ul>The Consortium – Synergy Benefits <ul><li>Total transaction benefits -€2944m </li></ul><ul><li>Global Wholesale Business - €2042m </li></ul><ul><li>Citizens + LaSalle - €820m </li></ul><ul><li>Integration of Operations - €40m </li></ul><ul><li>No Transaction benefits in International Retail </li></ul><ul><li>Cost Synergies -> €2091m </li></ul><ul><li>Revenue Synergies -> €853m </li></ul><ul><li>Expected Pre-Tax Synergies -€1337m </li></ul><ul><li>Retail Banking - €363m </li></ul><ul><li>Commercial banking - €143m </li></ul><ul><li>Private banking - €203m </li></ul><ul><li>Asset Management - €160m </li></ul><ul><li>IT & operations - €225m </li></ul><ul><li>Overheads - €243m </li></ul><ul><li>Cost Synergies -> €1150m </li></ul><ul><li>Revenue Synergies -> €187m </li></ul>
  25. 25. THANK YOU!

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