ABN, Barclays shares up as takeover talks underway

(Adds background, updates shares)

LONDON, March 20 (Reuters) - Shares in Dutch bank ABN AMRO AAH.AS and Barclays (BARC.L) rose on Tuesday after they confirmed they were in exclusive talks that could see Britain's third-biggest bank pay more than $80 billion for its rival.

Barclays and ABN said late on Monday they were in "exclusive preliminary discussions". No details of the structure of any deal were released, but at current values a combination would create a $166 billion financial services group.

By 0830 GMT ABN shares were up 4.1 percent at 31.18 euros, after hitting an all-time high of 31.33, to value it at more than 59 billion euros ($78.5 billion)

Barclays shares were up 2.3 percent at 692 pence, valuing it at more than 45 billion pounds ($87.5 billion).

Analysts said a deal would make strong strategic sense, but there was limited scope for Barclays to pay a significant premium for ABN as cost savings from a deal would be limited.

JP Morgan estimated Barclays could bid up to 33.5 euros per share for ABN, although it said this would be 7 percent dilutive for the UK bank's shareholders.

Merrill Lynch said it was unlikely that ABN would consider an offer below 35 euros per share, at which level Barclays would require 5.3 billion euros in synergy benefits to make the deal neutral for its earnings by 2009.

((Reporting by Steve Slater

Editing by Quentin Bryar

Reuters Messaging: rm://steve.slater.reuters.com@reuters.net

E-mail: steve.slater@reuters.com

Telephone: +44 207 542 4367))

($1=.5142 Pound)

($1=.7517 Euro) Keywords: ABN BARCLAYS/

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