Merger Watch: ABN AMRO to Merge with Barclays, Sell LaSalle to BofA
Status:
The bids for ABN AMRO and its subsidiary, LaSalle bank, are at an impasse. A Dutch court ruled that the sale of LaSalle to Bank of America (BofA) must be approved by an ABN AMRO shareholder vote and now the Dutch Supreme Court is weighing an appeal of that decision by ABN AMRO and BofA. A decision is expected sometime this summer. Also, Bank of America is suing ABN AMRO for breach of contract in a New York court.
Many advocacy groups have raised concerns that a BofA-LaSalle merger would push BofA's asset size over the legal limits. Visit the California Reinvestment Coalition's website for more info and sample comment letters - due by July 3.
Background:
The Dutch bank ABN AMRO is at the center of competing takeover and merger bids from some of the world’s largest financial institutions – namely Bank of America, Barclays and the Royal Bank of Scotland (RBS). No matter which financial institutions prevail, the mergers will most likely produce the world’s largest banking takeover.
The Potential Mergers:
- Bank of America Agrees to Acquire LaSalle Bank from ABN AMRO - On April 23rd, Bank of America Corp, the world’s tenth largest bank in assets, agreed to acquire ABN AMRO North America Holding, the American operations of the Dutch bank ABN AMRO, for $21 billion. ABN AMRO North America Holding is the parent company of LaSalle Bank Corporation and LaSalle’s subsidiaries. LaSalle Bank currently has offices and branches in Chicago, Michigan and Indiana.
- Barclays and ABN AMRO Agree to merge – At the same time the BofA/LaSalle Bank deal was announced, ABN AMRO agreed to be acquired by the British bank Barclays in a deal that would create the world's fourth largest financial institution. The deal is contingent on LaSalle Bank being sold to BofA, as described above.
- Royal Bank of Scotland Group Makes Rival Bid to Acquire ABN AMRO - The Royal Bank of Scotland Group (RBS), representing a consortium that also includes two other European financial institutions, countered Barclays’ offer with a bid of $96 billion to acquire ABN AMRO with the intention of breaking it up. The RBS’s bid is contingent on its ability to acquire all or parts of LaSalle Bank.
Check out this Alert Map (pdf) to see visualize how these pieces fit together.
Issues of Concern:
The bidding for ABN AMRO and LaSalle Bank includes some of the largest financial institutions in the world. Forbes Global 2000, which rates the market value of corporations, ranks BofA (2nd), the RBS (13th) and Barclays (18th) among the largest companies, of any kind, in the world. Any merger scenario involving these institutions would further concentrate financial services wealth and economic power in the hands of a few multi-national banking conglomerates. This will result in less power on the local level to hold banks accountable to community needs.
One particular concern is whether a BofA’s acquisition of LaSalle Bank, which currently has offices and branches in Chicago, Michigan and Indiana, will violate U.S. anti-trust laws, which places a 10% cap on a bank’s share of national deposits. Bank of America, which currently holds more than 9% of U.S. deposits, has a history of trying to circumvent the 10% cap. NEDAP estimates that Bank of America’s acquisition of LaSalle could possibly represent anywhere from 9.95% to 10.04% of U.S. deposits. In the event that BofA proceeds with acquiring LaSalle, The Federal Reserve Bank would make the final determination as to whether BofA exceeds the 10% deposit limit.
RBS Group operates Citizens Financial Group, the 8th largest bank in the U.S., and Bank of America has 26 branches in New York City. Neither Barclays, ABN AMRO or the RBS Group have a significant retail branch presence in New York.
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