KEY POINTS:
Barclays may raise £10 billion ($26 billion) from the governments of China and Singapore to help fund a higher bid for ABN Amro.
The offer for ABN Amro will be raised to about £50 billion, the BBC reported on its website yesterday. China and Singapore will pay 740p for each Barclays share, the report said.
Barclays chief executive John Varley is under pressure from investors to drop the world's biggest banking takeover after a higher bid led by Royal Bank of Scotland Group drove up the price.
China's involvement would signal its intent to seek higher returns on its US$1.3 trillion ($1.6 trillion) of currency reserves, two months after agreeing to pay US$3 billion for a stake in buyout fund Blackstone.
"Seeing the Chinese Government directly involved in this deal, on the heels of the Blackstone investment, should be a wake-up call to the world that China is serious about investing its vast reserves," said Kirby Daley, a strategist at Societe Generale's Fimat unit in Hong Kong.
A successful takeover would create Europe's second-largest bank after HSBC Holdings. ABN Amro, with a market value of €70 billion ($121 billion) , is the largest Dutch bank.
Should the deal succeed, China would hold about 7 per cent of the enlarged group and Singapore's state-owned Temasek Holdings would own 3 per cent, the BBC said. The two Asian nations will take smaller stakes if the ABN Amro bid fails, the BBC said. Blackstone is arranging the deal, the report added. Barclays might also buy back "several billion" pounds of its own shares, the BBC said.
The Wall Street Journal reported that Barclays is in talks to sell a stake to Temasek and "one other investor," citing people it didn't identify.
Barclays spokesman Will Bowen in London declined to comment, as did Temasek's Singapore-based spokesman Mark Lee.
Having China as a major shareholder could complicate efforts by Barclays to expand in the US, said Adrian Foster, director of capital markets at Dresdner Kleinwort in Beijing. "The political complications that China's involvement would bring for its US expansion should outweigh the advantages of getting cheaper financing from the Chinese than from the markets," he said.
Royal Bank, Banco Santander, and Fortis on July 16 raised their offer to €71.1 billion, trumping Barclays' €64.5 billion bid. At £50 billion, the Barclays offer would exceed that of Royal Bank.
ABN Amro chief executive Rijkman Groenink said he expects most of the shareholders to choose the Royal Bank offer because it is higher. The difference between the two offers "is too big for many investors to even look at" the Barclays bid, Groenink said, adding that he still prefers the Barclays bid.
- BLOOMBERG
