European Bank Merger Faces Challenges

There is a fight brewing in Europe over one of the continent's oldest banks. Holland's ABN Amro announced today that it will merge with Barclay's Bank of the U.K in a $91 billion deal. But a consortium of other European banks is threatening to rip ABN Amro apart.

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There is a fight brewing in Europe over one of the continent's oldest banks. Holland's ABN Amro announced today that it will merge with Barclays Bank of the U.K. in a $91 billion deal, that's the plan. On the other hand, as NPR's Adam Davidson reports, a consortium of other European banks is threatening to rip ABN Amro apart.

ADAM DAVIDSON: ABN Amro's history goes back to 1824. The bank symbolizes Dutch pride, a small nation with a powerful global reach. But for the past few years, the bank has symbolized something else - near total failure.

Mr. MARK HARMER (Analyst, ING Wholesale Banking): They've had grand ambitions and they just don't seem to be able to pull it together, maybe it's bad luck.

DAVISON: Mark Harmer is an analyst with ING Wholesale Banking. He says ABN wanted to become the world's leading banker for small and medium-sized companies. It's been a disaster. Some of the bank's shareholders decided they'd make more money by carving ABN into little pieces and selling them off.

Mr. HARMER: They basically backed into a corner and Barclays Bank of the U.K. has graciously white-knighted, if you like, and come to their rescue.

DAVIDSON: Barclays is a major British bank, even older than ABN. It's been slowly, steadily expanding. By buying ABN, it can get instant global reach. So it seems ABN and Barclays are perfect for each other. But there's a problem. A consortium of European banks also wants to buy ABN, not to keep it alive, but to kill it and divvy up the assets. The Royal Bank of Scotland would take the U.S. assets, a Belgian bank would take the Dutch holdings, a Spanish bank would pick up the rest. And that consortium has more money to offer. So Barclays and ABN came up with a plan.

Mr. HARMER: ABN and Barclays need to do this deal for a number of reasons, and if they dabble in a little devilish activity along the way to get it done, you can understand their motive.

DAVIDSON: The devilish activity, Harmer says, is a sly move announced today along with the merger. Since ABN didn't want to be broken up, it decided to make itself less attractive. It promised to sell off its large U.S. subsidiary, La Salle Bank, to Bank of America. That might end the Royal Bank of Scotland's interest in the deal, which would likely end the rival takeover bid. If it works, ABN Amro will continue as a major bank, headquartered in Amsterdam. The Dutch can choose to ignore the fact that it will be owned by Brits.

Adam Davidson, NPR News.

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