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Barclays said yesterday it would go ahead with a bid to take over ABN Amro only if the terms were right, but its investors expressed increasing concerns it could end up in a damaging price war.
A consortium of rival bidders led by Royal Bank of Scotland yesterday
sweetened its already higher offer for ABN - raising the cash portion to over 90 per cent - and analysts said there were growing fears over Barclays' next step.
Barclays' all-share bid, which has been recommended by ABN's board, is worth €65 billion ($115.4 billion), or around €35 a share, which is 10 per cent lower than the RBS-led bid at €38.4 a share.
"The question now is what Barclays will do next - come back with an improved offer?" analyst Bruce Packard, at Pali International, said.
"We are nervous about the sounds coming from the Barclays camp. Management have sounded very confident of winning even before the Supreme Court ruled in their favour. But we think Barclays should not raise its offer."
Analysts expect Barclays to sweeten its bid by a deadline of July 23 - possibly with a cash component - but not to leap above RBS.
First, however, the bank will have to woo its shareholders and secure their support for a higher offer, including the backing of its top investors, many of whom also own RBS shares.
US hedge fund Atticus Capital grabbed headlines in June when it told Barclays to scrap its offer, saying it would be buying "an inferior business in an auction at inflated prices". Barclays has said Atticus' views are not representative of feedback from investors, but several shareholders said yesterday they were concerned that a new offer could destroy value.
"I still need to be convinced," said Dave Bradbury, head of equities of Canada Life in London, which has shares in both RBS and Barclays. "I'm not ruling out they can convince people, but we need more evidence."
Another shareholder who declined to be named said he would oppose a significantly higher bid from Barclays.
"I would expect Barclays to come back with a rejigged offer in due course, but it is becoming less likely that their shareholders would support the sort of level of bid they would need to make to win this," the shareholder said.
"They'd have to offer a price that would not be in the interests of shareholders. I wouldn't support them."
RBS and its partners will also face the task of wooing their shareholders, with RBS looking at a smaller part of the deal without ABN's US unit but still a large part of the risk involved.
Most investors, however, gave a cautious welcome to the revised bid. "It's a smaller deal for RBS. They are only part of a consortium," Bradbury said. "There is a little bit of concern, but I'd have more concern over Barclays."
- REUTERS
