VZCZCXRO8181
PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHTC #1967/01 3091552
ZNR UUUUU ZZH
P 051552Z NOV 07
FM AMEMBASSY THE HAGUE
TO RUEHC/SECSTATE WASHDC PRIORITY 0659
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHBS/USEU BRUSSELS 0573
RUEHAT/AMCONSUL AMSTERDAM 3821

UNCLAS SECTION 01 OF 03 THE HAGUE 001967 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
STATE FOR EUR/WE (TSMITH), EEB/IFD 
USDOC FOR 4212/USFCS/MAC/EURA/OWE/DCALVERT 
TREASURY FOR IMI/OASIA/VATUKORALA 
PARIS ALSO FOR OECD 
USEU FOR BARBARA MATTHEWS 
 
E.O. 12356: N/A 
TAGS: ECON EFIN EINV PGOV NL
SUBJECT: ABN AMRO TAKEOVER BATTLE OVER 
 
 
THE HAGUE 00001967  001.2 OF 003 
 
 
THIS MESSAGE IS SENSITIVE BUT UNCLASSIFIED.  PLEASE HANDLE 
ACCORDINGLY. 
 
¶1.  (SBU)  SUMMARY.  A consortium of the Royal Bank of Scotland, 
Spain's Banco Santander and the Belgian-Dutch bank Fortis have 
gained control of the Dutch bank ABN Amro after a long takeover 
battle that pitted the group against a rival bidder, the British 
bank Barclays.  A detailed plan for ABN Amro's division among the 
consortium partners is expected by December; the entire process 
could take up to three years.  Meanwhile, 'losing' ABN Amro to 
foreign entities has raised concerns among Dutch political, 
financial, and business leaders.  Some have proposed the 
introduction of a "market master" to supervise more closely mergers 
and takeovers.  Others believe investments by sovereign wealth funds 
require greater scrutiny.  END SUMMARY. 
 
AND THE WINNER IS . . . 
----------------------- 
 
¶2.  (U)  On October 5, a consortium of the Royal Bank of Scotland 
(RBS), Spain's Banco Santander Central Hispano, and the 
Belgian-Dutch bank Fortis won control of approximately 86 percent of 
ABN Amro's shares, in a move by ABN Amro shareholders that sealed 
the success of the consortium's 72 billion euro bid for the Dutch 
bank.  The British bank Barclays withdrew the same day its competing 
but lower bid of 67.5 billion euros.  The action ended a eight-month 
long battle that had begun in February when the British hedge fund 
The Children's Investment Fund (TCI) -- holding a one percent share 
in ABN Amro -- had demanded a split up or sale of the bank to the 
highest bidder in order to increase shareholder value. 
 
¶3. (U)  Rijkman Groenink announced his resignation as Chairman of 
ABN Amro's Managing Board on October 10, the same day that the 
NYSE-Euronext Amsterdam exchange withdrew the bank's listing from 
the AEX-index.  Commenting on his departure, Groenink said "in 
April, the bank [ABN Amro] wholeheartedly embraced a merger with our 
partner of choice [Barclays] as the next step in our long-term 
strategy.  Shareholders have now chosen the consortium's offer. 
That is why it is appropriate for me to make way for a successor who 
is willing and able to execute the consortium's plans."  Groenink is 
expected to earn approximately 26 million euros from the sale of his 
ABN Amro shares and performance-related bonuses.  In addition, he 
will receive a "golden handshake" worth 4.3 million euros. 
 
DIVVYING UP THE SPOILS 
---------------------- 
 
¶4.  (U)  Mark Fisher, Chief Executive of the Manufacturing Division 
and a Board member at RBS, has replaced Groenink as Chairman of ABN 
Amro Holding.  He will oversee the division of the bank between the 
consortium partners, which could take up to three years, and is 
expected to present in December for approval by the Dutch Central 
Bank (DNB) a transition plan detailing the exact division and number 
of job cuts.  The DNB will then have 13 weeks to evaluate the plan. 
 
¶5.  (U)  Other members of ABN Amro's Managing Board will retain 
their positions with revised duties.  Current ABN Amro directors 
will be joined by representatives from RBS, Banco Santander, and 
Fortis.  Brian Crowe, who runs RBS' Global Markets Division, will 
take over ABN Amro's Global Clients, Capital Markets and Transaction 
Banking Business Units.  John Hourican, who oversees RBS' European 
leveraged finance matters, will become ABN Amro's new chief 
financial officer.  Paul Dor from Fortis will run ABN Amro's Asset 
Management Units.  Javier Maldonado, who is responsible for wealth 
management and corporate banking at Banco Santander's Abbey UK Unit, 
will be responsible for ABN Amro's Latin American businesses. 
Arthur Martinez will continue to chair ABN Amro's Supervisory Board 
and will be joined by Fred Goodwin (RBS Chief Executive), Jean-Paul 
Votron (Fortis Chief Executive), and Juan Inciarte (General Manager 
Banco Santander). 
 
¶6. (SBU)  Barbara Frohn a Senior Vice President at ABN Amro (please 
protect), commented to a visiting Government Accountability Office 
(GAO) delegation that the division of wholesale units and creation 
of interoperable information technology (IT) reporting systems would 
be challenging.  However, she did not anticipate significant 
communication and cooperation problems within the new management 
structure. 
 
¶7.  (SBU)  Jan Willem Blok, ABN Amro's Government Affairs Manager 
(please protect), recently told Econoffs there was "unrest among 
 
THE HAGUE 00001967  002.2 OF 003 
 
 
employees" and the "winners" would now decide ABN Amro's future.  He 
confirmed estimates of the loss of some 19,000 employees at ABN Amro 
and the three consortium banks.  RBS will reportedly gain ABN Amro's 
businesses in North America (excluding the Chicago-based LaSalle 
Bank, which was sold to Bank of America on October 1), Europe 
(excluding the Italian-based Antonveneta Bank), and Asia (excluding 
Saudi Holland), as well as ABN Amro's Global Clients Unit (including 
wholesale clients in the Netherlands and non-Brazilian clients in 
Latin America).  Banco Santander will acquire ABN Amro's Business 
Unit Latin America (excluding wholesale clients outside of Brazil) 
and Antonveneta in Italy.  Fortis will gain the Business Unit 
Netherlands (excluding the wholesale clients), private clients 
(excluding Latin America), and ABN Amro's Asset Management Units. 
To limit its share of the Dutch retail market from increasing beyond 
37 percent -- a level the European Commission considers too high, 
Fortis is subsequently expected to sell 10 percent of its ABN Amro 
Netherlands assets. 
 
POLITICAL FALL OUT 
------------------ 
 
¶8.  (SBU)  Meanwhile, some opposition politicians have questioned 
whether the Dutch government should have allowed the takeover to go 
forward.  Members of the Green Left and the Socialist Party (SP), 
supported by the Freedom Party and D66, have asked for details on 
how the bids were judged.  SP member Ewout Irrgang has argued that 
Finance Minister Wouter Bos should not have granted a declaration of 
no objection to the consortium.  However, the majority, including 
Paul Tang from the PvdA (Labor) Party, have reacted more cautiously, 
noting that politicians should not try to influence the bid process. 
 (NOTE:  The Dutch Finance Ministry (MOF) and the European 
Commissioner for Competition must both approve any merger or 
takeover of this scale in the Netherlands.  Bos granted a 
"declaration of no objection" to Barclays on August 13 and to the 
consortium on September 17.  Officially, the MOF does not need 
parliament's approval to grant such declarations.  END NOTE.) 
 
¶9.  (SBU)  Others in the financial community blame ABN Amro for 
making itself vulnerable by underperforming.  ABN Amro, the second 
largest Dutch bank behind ING, had been a takeover target since the 
beginning of 2007.  ABN Amro's share price had stagnated, and its 
earlier acquisition of the Italian Antonveneta Bank had proved more 
expensive that initially forecasted.  Initial talks of a merger with 
ING and the creation of a "Dutch banking giant" ended without 
results.  Some attributed the failure to personal disagreements 
between ABN Amro and ING management.  Groenink's 26 million euros 
remuneration is now fueling a political debate within the 
Netherlands over the size of executive salaries and related bonuses. 
 
 
MORE SUPERVISORY CONTROL? 
------------------------- 
 
¶10.  (SBU)  Concerning supervisory oversight, the Netherlands 
Authority for Financial Markets (AFM) has called for a bigger role 
for financial supervisors during takeovers.  According to AFM Member 
of the Board Paul Koster, the AFM should become a "market master" 
for mergers and takeovers, an idea that has been backed by Finance 
Minister Bos.  As an example, Koster has said that such a "market 
master" would not have approved the sale of ABN Amro's Chicago-based 
LaSalle branch to Bank of America.  Many financial observers have 
said the sale was an unsuccessful effort by ABN Amro management to 
make the bank less attractive to the RBS-led consortium.  While the 
sale went through in the end, it was contested in court by ABN Amro 
shareholders and was seen as a test case on shareholders' versus 
management's power. 
 
A RISE IN PROTECTIONISM? 
------------------------ 
 
¶11.  (SBU)  While there is general agreement that market forces 
should continue to govern economic decisions, including on mergers 
and takeovers, some Dutch political and business leaders are now 
also calling for greater state control of "vital sectors," such as 
airports, ports, and the energy network, where public and social 
interests are at stake.  They point to the emergence and increasing 
financial power of sovereign wealth funds from countries such as 
Russia and China and the potential political influence that such 
funds can carry.  (NOTE:  It only became known late in the ABN Amro 
bidding game that Barclays' final bid was backed by China's 
Development Bank.  END NOTE.) 
 
THE HAGUE 00001967  003.2 OF 003 
 
 
 
¶12.  (SBU)  In a recent press interview, Economic Minister Maria van 
der Hoeven acknowledged that foreign-owned companies account for 
some 80 percent of the listings on the NYSE-Euronext Amsterdam 
exchange.  She noted these companies were "doing just fine," adding 
that mergers and takeovers must be the responsibility of companies 
themselves.  However, she also commented that it would be naive for 
the government to just stand by while extremely wealthy funds "shop 
for Dutch companies."  Embassy contacts have confirmed that van der 
Hoeven's Economic Ministry is exploring with the MOF whether an 
experts group is needed to investigate the functioning and possible 
risks of such funds. 
 
COMMENT:  A WAKE UP CALL 
------------------------ 
 
¶13. (SBU)  ABN Amro's takeover has clearly served as a wake-up call 
for many in the Netherlands.  The Barclays bid, which was supported 
by Dutch Central Bank President Nout Wellink as well as Groenink, 
would have left the 183-year-old Dutch bank largely intact.  With 
the battle over and plans for the split up of ABN Amro proceeding, 
Dutch politicians and business leaders are now focused on what, if 
any, measures might be needed to protect other "vital interests" in 
the Netherlands.  Nonetheless, it remains too early to predict 
whether these actions and related concerns will lead to stricter 
regulation or oversight of the Dutch financial and/or business 
sectors. 
 
GALLAGHER