RBS, Fortis, Santander eye break-up bid for ABN

LONDON (Reuters) - Royal Bank of Scotland (RBS.L), in a consortium with Fortis FOR.BR and Spain's Santander (SAN.MC), has approached ABN AMRO AAH.AS with a view to entering takeover talks, a source close to the matter said.

ABN, worth 64 billion euros ($87 billion) at current market prices, has been in exclusive merger talks with Barclays (BARC.L) since last month to strike the biggest-ever bank takeover, but a 30-day period of exclusivity expires next week.

The source said RBS, Europe's second-biggest bank, approached ABN on Friday morning.

A planned joint bid from the three banks would entail a full break-up of ABN's extensive retail and wholesale banking operations, a move that the Dutch regulator indicated this week it would not oppose, though the carve-up would be very complex, as would structuring a three-way offer.

Barclays currently has the blessing of ABN's board, but analysts say the trio of banks could reap higher cost-savings and therefore offer a higher price -- up to around 40 euros per share on some estimates, compared with Barclays' expected bid at 34 euros and a market price of 33.65 euros at Friday's close.

Fortis and RBS were not available for comment, while both Santander and ABN declined to comment.

Earlier on Friday, Santander Chief Executive Alfredo Saenz said Spain's largest bank was still looking at opportunities and markets that would fit into the group. Depending on the deal, ABN could fill gaps in Brazil, Italy and elsewhere in Europe.

Media reports last weekend suggested that in a joint deal Santander would get ABN's European retail operations and South American businesses, while RBS would acquire ABN's U.S. retail bank LaSalle and its wholesale banking operations.

Fortis has pledged to expand internationally so that at least 30 percent of net operating profit comes from outside the Benelux countries by 2009.

AND BARCLAYS?

Barclays is still the only suitor with the blessing of ABN's board and remains in exclusive talks until next week, though it was under pressure from shareholders on Friday to secure a sound price or swallow its pride and walk away.

The exclusivity period is due to end around April 18 -- just over a week before shareholder meetings for both banks on April 26 and days before an April 20 deadline for ABN's institutional shareholders to register proxy votes.

The banks do not have to make a statement on April 18, but a source familiar with the matter said the two sides planned to give an update by then, telling the market whether they had agreed a bid, extended exclusive talks or ended discussions.

Barclays declined to comment on whether Friday's move by RBS could accelerate talks and an eventual statement.

Barclays and ABN have already agreed a combined company would be headquartered in Amsterdam and that the two top jobs would be split, but sources familiar with the matter said on Friday they were hammering out key issues including corporate structure, cost synergies and price.

"The banks have announced some big-picture lines for the framework of a bid, now it is just about filling in the rest," said one of the sources. The two sides were also working on the details of tax and regulatory issues, the sources added.

Analysts polled by Reuters said they saw an offer around 34 euros per share -- just above the current market price and valuing ABN at 65 billion euros ($88 billion) -- though that could rise in the event of a bidding war. Market speculation this week put a possible bid as high as 38 euros, a level dismissed by sources close to the talks and by analysts.

"I don't think this is a great deal, unless they get it cheap, and that is looking unlikely. I can't see a huge amount of positives for Barclays shareholders," said one institutional Barclays shareholder who declined to be named.

"Anything much above 35 (euros per share) is going to be a struggle for them to justify."

At its current market price -- up more than 23 percent since talks began -- ABN is already trading around 2.5 times 2007 book value, above a sector average of two times book, according to Keefe, Bruyette & Woods. The ABN multiple was two times book before the merger talks were made public.

Media reports have put synergy savings from the deal at around $4 billion for Barclays, though sources close to the matter said the figure was likely to be lower, probably below $3 billion, given limited overlap.

Other rival bidders could also emerge ahead or around ABN's AGM next week.

"I still think that if you draw the list of higher-value owners of ABN than Barclays, it is a pretty long list," analyst Antony Broadbent at Sanford Bernstein said. "I don't even think we should rule out HSBC (HSBA.L) completely or BBVA (BBVA.MC), or even the French or Americans."

(Additional reporting by Emma Davis in Brussels, Jane Barrett in Madrid, Inge de Brouwer and Harro Ten Wolde in Amsterdam)