NatWest rejects RBS bid

By THIS IS MONEY
Updated:

 

NatWest has rejected Royal Bank of Scotland's takeover bid. NatWest's brief statement, however, lacked the harsh words used in response to Bank of Scotland's hostile bid. Analysts and fund managers expect NatWest to back the Royal Bank proposal once it has increased its offer.

The two banks have been in discussions for some time but NatWest rebuffed Royal Bank's friendly approach at the weekend.

Royal Bank of Scotland is offering £25 billion share and loan notes for NatWest Group. The offer is worth marginally more than Bank of Scotland's increased approach, launched on Friday.

Royal Bank is offering 0.968 new shares plus 305p of loan notes per NatWest share. The deal values each NatWest share at about 1500p, compared with the BoS offer of 1460p. RBS shareholders would own 37% of the enlarged business.

Royal's Spanish shareholder, BSCH, is paying £1.2 billion in cash for new RBS shares, taking its stake from 9.9% to about 6% of the combined group. Pan-European moves would be considered in the future by the Scottish/Spanish duo. British insurance group CGU will increase its stake in RBS and become its bancassurance partner, replacing Scottish Widows, recently acquired by Lloyds TSB.

'This is an aspirational bid. It is not scorched earth. It is a real class act,' said Sir George. If successful, RBS chairman Lord Younger would continue to chair the combined group in a non-executive capacity. Sir George would become executive deputy chairman, and deputy chief executive Fred Goodwin would be promoted to the chief executive's job. There would be no roles for NatWest chairman Sir David Rowland or his chief operating officer Ron Sandler.

RBS is looking at annual cost savings of £1.18 billion in three years and initial profit enhancement of £240 million on the revenue side. About 1800 job losses have been schemed in, mainly through natural wastage.

The Scottish group expects to sell NatWest's fund management business Gartmore and the US division of capital markets subsidiary Greenwich NatWest. It is likely to keep Ulster Bank and Greenwich in Britain. Royal says it can use existing technology for both groups and would retain both retail networks as competing entities.

The RBS bid was worth more than £26 billion at launch but its share price fell 82p to 1246p during the day, reducing the value of its offer.

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