10 December, 2009

Netherlands Bank Mergers & Acquisitions (ABN AMRO Holding)

Photo: Banks are perhaps some of biggest spenders in marketing. Shown here is a pair of Team ABN AMRO cuff-links in the around-the-world Volvo Ocean Race 2005-2006.

In late 2007, ABN AMRO Holding was taken over by a consortium formed by the Royal Bank of Scotland, Belgium's Fortis S.A./NV and Spain's Banco Santander. Subsequently, both the Royal Bank of Scotland and Fortis became de facto insolvent. The Dutch operations of Fortis and ABN AMRO were nationalized by the Dutch state in October 2008.


Algemene Bank Nederland (ABN)
Thanks to their strategic locations on the coast of the North Sea, Amsterdam and Rotterdam have functioned as major trading, transportation and financial centres since the 1600s. To further strengthen their role in trade and finance, King William I of the Netherlands signed a Royal Decree in 1824 establishing the Nederlandsche Handel-Maatschappij (Netherlands Trading Society) in Amsterdam. Gradually, the Nederlandsche Handel-Maatschappij turned its attention to trade financing. In October 1964, it merged with De Twentsche Bank to become the Algemene Bank Nederland, which is Dutch for "General Bank Netherlands".

Amsterdam-Rotterdam Bank (AMRO Bank)
Amsterdam and Rotterdam have been rivals in winning trade and finance since the medieval times. In 1863, the business leaders in Rotterdam set up the Rotterdamsche Bank, which was modelled after British colonial banks like the Mercantile Bank and the Chartered Bank. Initially, Rotterdamsche Bank specialized in providing loans to companies operating in the Dutch East Indies (present-day Indonesia, then a Dutch colony). Subsequently, the bank decided to expand its operations at home in the Dutch market. Early in the 20th century, Rotterdamsche Bank changed its name to Rotterdamsche Bankvereeniging, or Robaver for short. In 1964, Robaver merged with Amsterdamsche Bank, which was founded in 1871 to focus on the Dutch and German money markets. The new bank was known as the Amsterdam-Rotterdam Bank, or AMRO Bank for short.

Recent transaction(s):

  • In 1990, ABN and AMRO Bank announced a friendly merger to create ABN AMRO Holding NV.
  • In 1996, ABN AMRO bought Standard Federal Bancorp for USD $1.9-billion. Standard Federal was based in Troy, Michigan.
  • In 1998, ABN AMRO bought Brazil's 4th largest bank Banco Real for USD $2.1-billion to form Banco ABN AMRO Real.
  • In 2001, ABN AMRO's U.S. division LaSalle Bank bought Michigan National Bank from National Australia for USD $2.75-billion.
  • In 2003, ABN AMRO’s Brazilian division Banco ABN AMRO Real bought Banco Sudameris from Italy's Banca Intesa for Eur 648-million.
  • In 2005, ABN AMRO offered to buy the 87.3% of Italy's Banca Antonveneta that it did not already own for Eur 6.30-billion (USD $8.10-billion). Following ABN AMRO's announcement, Banca Popolare Italiana (formerly Banca Popolare di Lodi) launched its own but lower offer for Banca Antonveneta. Subsequently, it was discovered that Banca d'Italia's (Italy's central bank) governor Antonio Fazio had secretly pushed for a "made-in-Italy" merger between Popolare Italiana and Antonveneta over the higher offer from ABN AMRO. The scandal resulted in Mr. Fazio’s resignation and the suspension of Popolare Italiana's senior executives. In late 2005, ABN AMRO was given the final approval to take over Banca Antonveneta in a deal that valued the Italian bank at Eur 8.12-billion (USD $9.80-billion). The takeover of Antonveneta was the first time a major Italian bank had been acquired by a foreign bank.
  • In 2007, ABN bought 93.4% of Pakistan's Prime Bank for PKR 13.8-billion (Eur 172-million). ABN also launched a tender offer for the remaining 6.6% shares in the open market. Prime Bank operated 69 branches in 25 Pakistani cities. The bank had Eur 654-million in assets and Eur 515-million in deposits.
  • In April 2007, ABN AMRO and Britain’s Barclays plc agreed to a friendly merger. ABN AMRO had been under shareholder pressure for its under-performing profitability for several years. Barclays’ initial all-stock offer valued ABN at Eur 67.0-billion. Meanwhile, the Royal Bank of Scotland (RBS), Belgium’s Fortis and Spain’s Banco Santander were also preparing for a competing bid to buy out and carve up ABN AMRO Holding amongst themselves. Hoping to thwart the hostile offer from RBS-Fortis-Santander, ABN AMRO agreed to sell ABN AMRO North America Holding Co. (LaSalle Bank Corp.) to Bank of America for USD $21-billion in cash. RBS had wanted to combine its U.S. division Citizens Financial with ABN AMRO's LaSalle Bank. In pre-emptively selling LaSalle Bank to Bank of America, ABN AMRO was hoping to make itself unattractive to the Scottish-Belgian-Spanish consortium and foil the "break up ABN AMRO" proposal.
  • In 2007, amidst the battle for ABN AMRO Holding, the Dutch bank agreed to accept TWD 6.90-billion (USD $209-million) from the Taiwan government to takeover the operations of the bankrupt Taitung Business Bank. Taitung Business Bank had been under state administration due to its overwhelming non-performing loan portfolio. Under the agreement, the Taiwan government would pay TWD $6.90-billion to ABN to take over Taitung Business Bank's assets, liabilities and 32 branches. ABN AMRO already operated five branches in Taiwan.
  • In late 2007, ABN AMRO Holding lost its autonomy when its shareholders accepted a Eur 70.0-billion (USD $101.1-billion) buyout from the Royal Bank of Scotland (with a 38.3% stake), Fortis (33.8%) and Banco Santander (27.9%). The tri-bank consortium would break up ABN AMRO's various global operations amongst themselves in two years. Click here for a detailed timeline of the Battle for the Control of ABN AMRO.
  • During the second half of 2008, the RBS and Fortis were caught up in the Global Banking Meltdown. As financial institutions failed around the world from massive loan losses incurred from the U.S. real estate collapse, banks became unwilling to lend to each other, resulting in a sharp rise in the Libor rates (London Inter-bank Borrowing Rates). Banks that had over-extended themselves, including RBS and Fortis, became insolvent as their funding source dried up.
  • On 2008-09-29, the Belgian, Dutch and Luxembourg governments jointly rescued Fortis by providing Eur 11.2-billion (USD $16.2-billion) of emergency funding. The Belgian state agreed to buy 49% of Fortis' Belgian banking unit, Fortis Bank S.A./NV for Eur 4.7-billion (USD $6.79-billion); the Dutch state agreed to buy 49% of the Dutch bank unit, Fortis Bank Nederland Holding, for Eur 4.0-billion (USD $5.78-billion); whereas Luxembourg agreed to buy Eur 2.5-billion (USD $3.61-billion) of bonds convertible into 49% of the local unit Fortis Banque Luxembourg. Fortis was also expected to auction off the ABN AMRO businesses that it had just paid Eur 24-billion for in 2007. However, the most likely buyer, ING Groep, had announced that it was not interested in bidding for ABN AMRO’s global operations.
  • However, the massive cash injection from Belgium, the Netherlands and Luxembourg failed to quell widespread fears over Fortis’ survival, and clients were said to be transferring their deposits to other banks. On Friday 2008-10-03, the Dutch government made a surprise announcement that it had agreed to nationalize the entire Dutch operations of Fortis S.A./NV for Eur 16.8-billion (USD $23.2-billion). The units bought by the Dutch government included all of Fortis Bank Nederland (Holding) NV, Fortis’ interests in ABN AMRO, insurer Fortis Verzekeringen Nederland NV, and Fortis Corporate Insurance NV. The Dutch government’s deal to buy all of Fortis’ Dutch banking and insurance operations replaced the deal to buy 49% of Fortis Bank Nederland for Eur 4.0-billion (USD $5.78-billion) announced just a week earlier.
  • Even though Fortis’s Dutch operations were not believed to be badly in distress, the Belgian-based parent Fortis S.A./NV had been teetering on the brink of collapse. The Dutch government said in a statement that the nationalization of Fortis Nederland and ABN AMRO was needed to stabilize the panicky Dutch monetary system. The deal gave the Dutch government the entire control of the bancassurance operations, which would make it much easier to sell than had the government only acquired a minority stake. The deal also allowed Belgian-based Fortis to receive badly-needed capital.
  • The Dutch government planned to merge ABN AMRO and Fortis Bank Nederland into a new entity and privatize it in 2011 or later.
  • In November 2015, the Dutch government floated 20% of ABN AMRO on the Amsterdam stock exchange and raised EUR 3.34-billion, valuing the bank at EUR 16.7-billion. The Dutch state expected to take several years to unload all of ABN AMRO back to private shareholders.
  • In December 2016, ABN AMRO sold its private-banking business in Asia and the Middle East to Liechtenstein-based LGT Group. Terms of the sale were not disclosed. The unit managed USD $20-billion in Singapore, Hong Kong and Dubai. LGT is owned by Princely House of Liechtenstein and the purchase would increase its assets under management to more than USD $40-billion in Asia, and $160-billion globally.
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