Monday, April 30, 2007

'Legal threat' by BoA over ABN bank sale... a bit too obvious?

The ABN AMRO take-over turns out to become just as legal a takeover as the Antonveneta's takeover earlier. BBC NEWS reports that Bank of America is reported to be threatening one of the biggest lawsuits in history if its deal to buy LaSalle Bank from ABN Amro falls through. And in addition to the breach of contract claims against ABN Amro, it is also being reported that a claim for "interference" would be made against the RBS-led consortium.

To better understand all this, let's recap this consolidation-merger-take-over history for ABN AMRO.

1. ABN AMRO underperforms and gets a wake-up call by TCI asking for a split up and such
2. The Dutch bank supervisor (central bank) informs the public that it isn't pleased with TCI
3. ABN AMRO quickly speeds up its contacts with Barclays to prevent hostile take-over
4. The Dutch central bank tells us it is pleased with Barclays
5. Fortis, RBOS and Santander join the bidding game as the second bidder
6. The Dutch central bank tells us it finds the RBOS-consortium a bit risky
7. The Ministry of Finance reassures the public and EU Commission that it will consider all takeover bids on an equal footing, when deciding on the requested statement of no-objections,
8. ABN AMRO quickly sells LaSalle, thus becoming less attractive to the RBS-consortium
9. There is no statement whatsoever by the central bank/bank supervisor
10. Shareholders vote in favour of a lot of TCI-motions but are angry at the sudden sale of LaSalle;
11. ABN AMRO slows down the RBS-consortium in its disclosure request
12. A shareholders union (VEB) takes ABN AMRO to court for having sold LaSalle, the hearing occured last saturday; the judge will be ruling this Thursday
13. And now Bank of America informs us that it will go to court if the sale of LaSalle is not effected (note that the talks over the sale only lasted 4 days).
14. While the RBS consortium has lined up its financing.

Let's be clear: the Bank of America statement may be ABN AMRO inspired. Bank of America is a (partial) white knight, helping out ABN AMRO in a complicated take-over setting. The fact that they also consider an interference claim against the RBS consortium is quite telling in that respect. And in doing so, the Bank of America raises the stakes for the judge in the Netherlands that this week has to rule over freezing the sale of LaSalle to Bank of America. In my view this may be a typical ABN AMRO inspired move (remember how they moved in legally towards the central bank of Italy).

My personal guess is that this legal threat will terribly backfire. You don't want to influence a judge so obviously. And the legal threat is especially risky in a context where as a buyer you have only spent 4 days considering a bid on this bank. Because no serious bank in its sound mind would be bidding so carelessly and quickly for another bank. One always wants to check if there are no dead bodies in the closet somewhere. One may wish to consult the supervisor and/or shareholders. And all the stuff that would come with really assuring a due process. In fact, given the demonstrated care as to the process, one might even argue (in a legal sense) that - certainly in todays banking reality - the 'sale' can not be considered to constitute a real/proper sale. And my guess is that, pressured by the Bank of America threat, the judge in the Enterpise Court may perhaps be ruling that the 'sale' was not a true 'sale'.

Of course the judge has got to have strong nerves when freezing or undoing the Sale of LaSalle. But doesn't it appear odd to only allow 14 days for competing bids on LaSalle and to agree to a 200 million USD terminating fee if the original deal doesn't substantiate? And another thing: why haven't we heard anything from any one of the involved regulators. The Dutch central bank has been noticeably silent on this transaction. As have their oversees collegues. But wouldn't any significant spin-off of bank company activities require a further investigation by the supervisors as to changes in risk-profiles and such?

Questions, questions.... and another interesting week ahead....