Hedge funds snap up ABN Amro shares

Date: Tuesday, February 27, 2007
Author: Christine Seib, TimesOnLine

Several hedge funds are amassing stakes in ABN Amro, chief executive Rijkman Groenink admitted yesterday, as speculation increases that the Dutch bank will be subject to a takeover attempt.

The funds are thought to have taken stakes of about 1 per cent each in the banking group.

Sources said that the funds’ impetus was likely to be the prospect of an offer for ABN Amro, rather than expectations of a forced break-up of the business by activist investor The Children’s Investment Fund (TCI).

Jean-Pierre Lambert, an analyst at Keefe, Bruyette & Woods (KBW), said: “Our view is that the TCI move has created a catalyst for a foreign bank to make an offer for the Dutch bank”.

KBW speculated that higher bids could come from Citigroup and HSBC, as both had good cost synergies with ABN Amro.

Offers of a lower value could come from Spain’s Santander or BBVA or the UK’s Barclays or RBS, KBW said. Fortis, the Belgian bank, is another possible contender.

Last week TCI, the London-based hedge fund, which holds about 1.1 per cent of ABN Amro, told the Dutch bank that it wanted shareholders to be given the opportunity to vote on five resolutions at the annual general meeting on April 26.

These far-reaching resolutions are: the break-up of the bank; returning cash from disposals to shareholders; a complete sale of the bank; a report to shareholders on break-up negotiations within six months; an immediate halt to major acquisitions.

ABN Amro will make public the agenda for the meeting on March 28. Until then, it will consult with shareholders, the bank has said.

By making its letter to ABN Amro public, TCI succeeded in immediately pushing up the bank’s share price by 7 per cent.

But comments at the weekend by Nout Wellink, chairman of the Dutch Central Bank (DNB) yesterday forced prices down by 1.68 per cent to €27.47, after he said that TCI’s demands were “a bridge too far”.

“TCI’s letter seems to be really saying, ‘We don’t care who you sell what to, as long as you send us the money’,” Mr Wellink said.

He said that if TCI and the four or five shareholders thought to be in alignment with the hedge fund tried to use their shareholdings to force through the resolutions, the DNB would exercise its power to demand that a hedge fund with more than a 10 per cent share in a Dutch bank obtain permission from the central bank before using its voting rights.