Can ABN AMRO survive its own sale?

by Patrice Sarath, May 14th, 2007, Monday.

So was it passive-aggressive behavior that got ABN AMRO in the fix it’s in, or just plain bad business sense? Either way, things have gone from bad to yikes! for the Dutch bank, making one wonder exactly what the executive board’s strategy was.

To recap: Activist institutional shareholder The Children’s Investment Fund was not happy with the Dutch bank’s results and forced a shareholder vote to sell the bank. ABN AMRO entered into talks with Barclays plc and agreed to merge with the British banking behemoth. As part of the deal, it also said it would sell its American subsidiary LaSalle Bank to Bank of America.

At the same time, a consortium led by Royal Bank of Scotland and Dutch insurance giant Fortis made a rival offer. Unlike Barclays, RBS and Fortis had no sentimentality about keeping ABN AMRO in one piece — they wanted to carve the bank up for themselves, with LaSalle as part of the spoils.

Well, to paraphrase Jeff Goldblum in Jurassic Park II: first there’s the oohing and the aahing and then there’s the running and the screaming. The RBS-Fortis contingent was livid that ABN AMRO’s board had made what they considered a unilateral decision to merge with Barclays and sell off LaSalle. And you should have heard Bank of America when it looked like its deal to buy LaSalle was going to fall apart.

Now Dutch regulators are involved, trying to determine whether ABN AMRO had acted legally when it agreed to sell LaSalle. And the RBS consortium has just made an offer for LaSalle on their own — contingent upon buying all of ABN AMRO, of course.

It’s not usual that a company’s strategy blows up so spectacularly and so publicly like this. It looks like ABN AMRO’s plan to sell the bank was aimed mostly at foiling attempts to break it up, rather than seeking the best deal for shareholders. Were they trying to thumb their collective nose at TCI and the other dissidents?

If so, and if that’s an example of the tenor of their leadership, it’s no wonder that ABN AMRO is up for sale.

Now let’s see if they can survive the process.

Patrice Sarath is a writer and editor for Hoover's, covering the insurance and construction industries. Patrice also writes science fiction, fantasy, and screenplays. Her novels Gordath Wood and Red Gold Bridge have been published by Ace, an imprint of Penguin.