ABN AMRO Acquisition by RFS Holding

Abstract

ABN AMRO was formed from the merger of two largest banks in the Netherlands – Amsterdam–Rotterdam Bank (AMRO) and Algemene Bank Nederland (ABN) in the year 1991. During October 2007, ABN AMRO was acquired by a consortium of banks which consisted of RBS (38%), Fortis Bank (34%), and Banco Santander SA (28%). The consortium was known as RFS Holdings BV. The acquisition was aimed to create stronger businesses with enhanced market presence and growth prospects. The acquisition was expected to provide savings and opportunities for sustainable increases in profitable revenue. The offer terms were €30.40 in cash plus 0.844 new RBS shares for each ABN AMRO share. The total offer was €38.40 per ABN AMRO share based on RBS share price of 642.5 pence at the close of business on May 25, 2007. The proposed offer was approximately 79% in cash. The deal valued ABN AMRO at €71.1billion. The deal involving three banks buying out ABN AMRO was one of the biggest financial services takeovers ever. The consolidation helped Fortis to become a market leader with more than ten million customers in Benelux Retail and Commercial banking. Through acquisition, RBS aimed to expand in corporate and institutional banking. Santander through the acquisition became one of the top three banks by network and loans. The combination helped Fortis Bank to have a unique presence in Benelux and created the third largest network in the Netherlands. The cumulative returns for RBS were −39% during the period −4 to +173 days surrounding the acquisition period. The cumulative returns for ABN AMRO stock for the 177 days surrounding the acquisition announcement period were approximately −15%.