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LONDON - Dutch bank ABN Amro is likely to drop its formal recommendation for suitor Barclays' €65.6 billion ($117.6 billion) takeover offer today, say sources familiar with the situation.
Barclays' offer, sweetened last Monday, is formally conditional on a recommendation from ABN, but the sources said the British bank was unlikely to pull out of the race as a result of the move, and could instead revise that requirement.
ABN's managing and supervisory boards met on Friday and during the weekend, and an update on the takeover is expected alongside the bank's quarterly earnings, due to be published today.
The Dutch bank's management originally supported Barclays, but the revised bid from the British bank no longer included the ABN boards' recommendation.
The sources said yesterday that ABN's boards concluded at the weekend they could no longer recommend Barclays' mostly share offer over a higher, mostly cash bid from a rival consortium led by Royal Bank of Scotland.
ABN, which has come under pressure from investors to seriously consider both offers, is expected to remain neutral, allowing the matter to be resolved by shareholders.
The RBS-led offer, which would result in a break-up of ABN, is more than 90 per cent in cash and adds up to €38.1 a ABN share at current market prices - against Barclays' bid at €34.7 a share.
Barclays sweetened its offer with a cash portion, as China Development Bank and Singapore's Temasek took stakes in the bank, but its offer remains mostly in shares, and therefore vulnerable to market turbulence. ABN shares closed at €34.9 on Friday.
Should ABN drop its formal recommendation, Barclays is expected to hold out for some improvement in its share price and seek support at a later date, the sources said.
In the terms of its revised offer, Barclays said it reserved the right to "extend the date [July 30] for satisfaction of this pre-condition or waive the pre-condition in the event that it is not satisfied".
Separately, Barclays confirmed a report in London's Sunday Times newspaper that a group of unnamed hedge funds approached it to ask for help in resisting the RBS-led offer for ABN.
The hedge funds asked Barclays to take a stake in RBS partner Fortis and then vote against a key rights issue as the Belgian-Dutch bank raises cash for its part of the ABN deal. Barclays said it rejected the funds' offer.
Fortis' shareholder meeting is set for August 6.
- REUTERS
