RBS-led group offers more cash in ABN bid

By Steve Slater and Reed Stevenson

LONDON/AMSTERDAM (Reuters) - Royal Bank of Scotland (RBS.L) and its partners have sweetened their 71.1 billion-euro ($98 billion) bid for Dutch bank ABN AMRO AAH.AS, putting in more cash in an attempt to beat rival suitor Barclays (BARC.L).

The consortium, which also includes Spain's Santander (SAN.MC) and Belgian-Dutch group Fortis (FOR.BR), kept its offer for ABN at 38.4 euros per share, 10 percent above an all-share offer from Barclays currently worth about 35 euros per share.

But the trio raised the cash component of the bid to 93 percent from 79 percent before.

ABN shares rose 3.6 percent to end at 37.15 euros, while Barclays firmed 0.6 percent to 728.5 pence, which analysts said showed its shareholders may resist it making a higher offer.

"Even though the consortium is not raising its bid and just sweetening its offer it should be enough to convince the board of ABN and shareholders ultimately that it's a better deal if the Barclays' offer is not revised," said Guy de Blonay, fund manager at New Star, which owns shares in all the European banks in the takeover tussle. "Now the ball is in Barclays' camp."

If ABN chose to switch its recommendation it is obliged to notify Barclays, which would have five days to respond, according to an SEC filing of their original deal.

ABN AMRO's board is set to meet later on Monday or on Tuesday, sources familiar with the matter said, adding the board is likely to discuss Monday's developments at the meeting.

The increase in cash offered by the consortium follows a Dutch court ruling on Friday which allows ABN to sell its U.S. bank LaSalle to Bank of America (BAC.N) for $21 billion.

RBS had planned to buy LaSalle but would now receive the cash from the sale of the business instead.

RBS cut the amount of cost savings and revenue benefits it expects to achieve from the deal as without LaSalle there is less opportunity to increase wholesale revenues in North America.

It now expects to deliver annual cost and revenue benefits of 1.8 billion euros by 2010, from just over 2 billion euros estimated before, excluding LaSalle.

RBS Chief Executive Fred Goodwin said the consortium never came close to scrapping the takeover effort, despite the setback of missing out on LaSalle.

"It was attractive to buy these businesses last week, it's attractive to buy them this week and that's the basis on which we're going forward. We never got anywhere near thinking of pulling out," Goodwin said on a conference call.

Barclays could now respond by raising its offer or adding some cash to its payment but it may face pressure from some investors who are also big shareholders in RBS and want to avoid the two banks getting into a bidding battle, analysts said.

The 20 biggest shareholders in Barclays, who own about 35 percent of its shares, also own just over 23 percent of RBS, according to Reuters data.