The World's Capital: Going Global

The Wall Street Journal Online

In Bid to Land ABN,
Barclays Taps Funding
From China, Singapore

By CARRICK MOLLENKAMP and JASON SINGER in London and JASON DEAN in Beijing

What started a few months ago as a clubby European bank deal has become perhaps the first global takeover battle, drawing in financial institutions from the U.S., Asia and Europe.

Robert Diamond, president of Barclays, discusses the cash infusion the bank received from two Asian investors for an ABN Amro bid. WSJ's Dennis Berman has the interview.

Barclays PLC, its plans to acquire ABN Amro Holding NV of the Netherlands in a friendly transaction spoiled by a richer bid from a rival consortium, reached halfway across the world to government entities in China and Singapore to boost its offer to $93.34 billion and offer more cash.

In so doing, it quickly illustrated how new sources of capital may play an increasingly influential role in deal making.

Barclays said yesterday that China Development Bank, a Chinese government-controlled lender, plans to invest at least €2.2 billion ($3.04 billion) and as much as €9.8 billion for a stake in Barclays of at least 3.1% and as much as 8%, if Barclays's bid for ABN succeeds and if regulators approve. It could become the largest overseas investment by a Chinese company to date. And at 8%, China Development Bank would be, by far, the biggest shareholder in the British bank. Singapore's Temasek Holdings Pte. Ltd. will invest as much as €3.6 billion in Barclays.

Increasingly, banks outside the European sphere are playing a role in the ABN fight. In a side deal to ABN's sale to Barclays, ABN agreed to sell its U.S. unit, LaSalle, to Bank of America Corp. But that move sent the ABN sale into courts in the Netherlands and U.S. until recently when the Dutch Supreme Court allowed the $21 billion LaSalle sale to go through.

It remains unclear whether bringing in the Asian entities as investors will be enough to put Barclays over the top in its battle for ABN. The cash infusion increases the Barclays bid to €68.89 billion from €64.79 billion and changes its all-stock offer to one that is 37% cash, an effort to make it more appealing to ABN investors. Still, it remains well shy of a €72.37 billion bid from a consortium of Royal Bank of Scotland Group PLC, Spain's Banco Santander Central Hispano SA and Dutch-Belgian bank Fortis NV.

A BIDDING WAR FOR ABN

• Barclays Stake Sale Shows Growing Role of China
07/23/07

• Time for Barclays's Next Serve
07/17/07

• Dutch Court Allows ABN's LaSalle Sale
07/14/07

• ABN Battle Won't End With LaSalle Sale
06/27/07

• ABN Bid: Sweet and Sour
05/30/07

• Goodwin of RBS Braces for Another Fight
04/26/07

• Barclays Agrees to Buy ABN Amro
04/23/07

KEY PLAYERS

The fight to acquire ABN Amro, in what would be the largest bank deal ever, is growing increasingly contentious. Here's a look at the key players in the takeover battle.

To close the gap between its offering -- €36.47 per ABN share -- and the consortium's offer of €38.31 per ABN share, Barclays is counting on its stock price to go up. Yesterday, Barclays shares closed at 735 pence in London, up 3%. Robert Diamond, Barclays president, said that with "a little bit of time," the stock could increase. Barclays's chief executive, John Varley, meanwhile, said he doesn't plan to increase his offer. "We're not going to top it up with cream," Mr. Varley said. "It is rich in cream."

But even if Barclays fails, Mr. Varley will have radically sped up his goal of moving Barclays deeper into emerging markets.

China Development, headed by Chen Yuan, has an extensive portfolio of Chinese customers it can introduce to Barclays for more complicated financial products and services that China Development doesn't provide, such as asset-management services. China Development's main business is lending to Chinese government-owned companies, a number of which are doing big business overseas, and as Chinese companies expand into places like South Africa, Barclays hopes to capture the banking business behind those deals.

Given China Development Bank's role in infrastructure and China's booming demand for commodities such as metals, Barclays plans to provide expertise in hedging commodities. The British bank, for example, will put employees on the ground to provide training and assist in infrastructure buildout.

"If you look at even the amount of infrastructure investment that African countries are projected to make over the next five to 10 years, it's clearly an area that the Chinese have deemed to be of strategic importance to them," said Jerry del Missier, co-president of Barclays Capital, the capital markets business of Barclays. Mr. del Missier helped in structuring the stake sales.

Barclays began courting China Development Bank and Temasek in May and June as the RBS-led consortium became aggressive in its pursuit of ABN. Barclays's Mr. Diamond directed top Barclays officials to approach China Development Bank, with which Barclays had an existing but much narrower relationship, and Temasek. In London, the two worked with Naguib Kheraj, Barclays's former finance chief who is advising the bank on the ABN transaction.

To ensure the China Development-Barclays deal wouldn't be caught in the political backlash that prompted China's Cnooc Ltd.'s to abort its attempt to buy U.S. oil producer Unocal Corp., Blackstone Group LP discussed the deal with British government officials, including Alistair Darling, the new chancellor of the exchequer; Mervyn King, governor of the Bank of England; and Sir Callum McCarthy, the outgoing chairman of Britain's Financial Services Authority.

The officials said the deal would be seen as a vote of confidence in Britain's financial sector, not as a threat, said John Studzinski, former head of investment banking at HSBC Holdings PLC, who is now head of Blackstone Group's mergers and acquisitions advisory group, which advised China Development on the deal.

Antony Leung, a former Hong Kong finance secretary who now heads Blackstone's private-equity operation in Greater China, acted as the liaison with China Development.

China's Barclays investment comes just two months after China's government agreed to invest $3 billion of the country's foreign-exchange reserves in Blackstone Group, on the eve of the U.S. private-equity giant's initial public offering.

The Barclays deal launches onto the international stage a large but so-far little noticed Chinese institution. China Development Bank was set up in 1994 as a policy bank, to make loans that support the Chinese government's economic initiatives. Its main business has been lending to companies and local governments for government-backed infrastructure projects in China.

But under Mr. Chen, it has been run increasingly like a commercial entity, and one with a growing international agenda. China Development boasts an international advisory council including major figures in global finance like Maurice "Hank" Greenberg and former Bank of England Governor Sir Edward George.