(AMSTERDAM, Netherlands) — ABN Amro NV and Barclays PLC announced Monday they have agreed to merge in the largest cross-border combination in European banking history.
Barclays offered $49.25 for each ABN share, slightly lower than Friday's closing price of $49.38, the banks said. As part of the deal, ABN announced it is selling its U.S. unit LaSalle Bank to Bank of America Corp. for $21 billion in cash.
The proposed chief executive of the new group, John Varley, said the deal was worth $91.16 billion, a 33 percent premium from ABN's share price when talks began last month.
Varley called the deal "the largest merger ever in global financial industry," and said it holds out the promise of growth at a rate twice as fast as global GDP.
"The proposed merger of ABN Amro and Barclays will create a strong and competitive combination for its clients with superior products and extensive distribution," the banks said in a statement. "The merged group is expected to generate significant and sustained future incremental earnings growth for shareholders."
The banks said the merger would create a single bank, headquartered in Amsterdam, with 47 million customers worldwide.
For each share, ABN Amro shareholders will be offered 3.225 ordinary shares in the new group, to be called Barclays PLC.
The group said it expected to save $4.8 billion annually in synergies by 2010. Some 12,800 jobs will be trimmed from the combined work force of 217,000, and another 10,800 positions would migrate to cheaper offshore locations, the banks said.
Barclays' Varley will be the chief executive officer, and Bob Diamond will be president. The new board will initially consist of 10 members from Barclays and nine members from ABN AMRO. Arthur Martinez, chairman of ABN Amro's supervisory board, will be nominated as chairman.
No role was announced in the new group for Rijkman Groenink, ABN Amro's CEO for the last seven years, a period when major shareholders judged the bank's holdings to have underperformed. Groenink said he would move to a non-executive directorship position.
Both banks would recommend the deal to its shareholders, and the Dutch bank was due to hold a shareholders meeting later this week. The merger was expected to be completed during the fourth quarter of this year, the banks said.
Despite the agreement, ABN said it will go ahead with meetings with representatives from Royal Bank of Scotland PLC, Spain's Banco Santander Central Hispano SA and Belgian-Dutch bank Fortis NV, which invited ABN to enter talks earlier this month.
Those talks would be aimed at splitting up ABN and selling off parts of its operations to each, which could be more lucrative for shareholders.
The Children's Investment Fund, a hedge fund which owns 2 percent stake in ABN and which had pushed for the bank's breakup to improve shareholder earnings, said it was studying the proposed deal.
For 2006, ABN's net profit rose 7.7 percent to $6.42 billion. Barclays posted an annual net profit of $9.14 billion, a rise of a third from 2005.
