Now that ABN AMRO is "in a buyout limbo" between Barclays Plc. (NYSE:BCS) and a Royal Bank of Scotland Group Plc. (LON: RBS) bid consortium, this brings up a situation: What will become of LaSalle Bank?
As part of the Barclays offer for ABN AMRO Holdings NV (NYSE:ABN), Barclays was going to sell LaSalle Bank to Bank of America Corp. (NYSE:BAC). That was going to finance $21 billion worth of the "record international bank merger" transaction. Since Royal Bank of Scotland (plus Santander and Fortis in the group) has joined in the bidding at a slightly higher price, the second offer is only "inclusive of LaSalle Bank."
The consortium may or may not keep LaSalle Bank in the long run, but it should at least consider the value. Under no circumstances should Bank of America be automatically assumed as the automatic winner, or at least not at the proposed price tag. The "for sale" sign is in the window at LaSalle Bank, so why not see who would be interested. A break-up fee of $200 million would be due to Bank of America if the deal changes. For such a large transaction that is not the end of the world. $200 million just isn't what it used to be.
So, who would step up to the plate outside of Bank of America? The two most obvious names inside the US are JPMorgan Chase & Co. (NYSE:JPM) and Wachovia Corp. (NYSE:WB). North of the border there is also Royal Bank of Canada (NYSE:RY), Bank of Nova Scotia (NYSE:BNS), and Toronto-Dominion Bank (NYSE:TD).
There are of course other potential bidders for the operation, but these are the most obvious and perhaps the most likely. There is also the entire Swiss and German banking groups that could use stronger euros (or Swiss francs) to gobble up the US-operation. Any of these can bring up the point that Bank of America is already too big and too close to that 10% deposit cap, although that trump card hasn't been laid down yet.
You also have Wells Fargo & Co. (NYSE:WFC) that could try it, and Citigroup Inc. (NYSE:C) has proven it is willing to keep spending money like a drunken sailor
. LaSalle may stay part of ABN AMRO and it may not, but the message is fairly clear that the employees there that are left standing will have new bosses.
Jon Ogg is a parner at 24/7 Wall St.; he does not own securities in the companies he covers.
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Reader Comments (Page 1 of 1)
4-27-2007 @ 8:09AM
chiman said...
The real issue that no one is talking about is the real value of LaSalle Bank as an entity into itself. The bank makes money, does loans, and provides financial services. And it does it well. The people at the bank believe that "if you do well, the bank does well, and therefore I do well" versus "if you screw up it makes me look better". Ex-president Norm Bobbins instilled this philosphy into LaSalle. I don't believe that Bank of America has this culture. (Any one at BAC care to refute this statement?)
Bank of America is only after branches not the LaSalle bank business. BAC would not likely keep any of the bank's divisions besides retail because it has its own people in Charlotte, NC. For $21 billion I'm sure that the shareholders of BAC could build some of their own braches and still have some money left over.
LaSalle bank is not just a savings and lending instution in Chicago it is a social instution. Its many charatible investments help to sponsor many organizations in the Chicago area. BAC is extreemly unlikely to see that this social benefit continues as it would need to recoup its investment.
By the way, all articles are calling the purchase of LaSalle for $21 billion, but an article said that the actual price to BAC would be $16 billion due to equity(?) in LaSalle. You would think that ABN Amro CEO Georig would know his own balance sheets.
If BAC follows through with the purchase of LaSalle there will be hundreds of very talented and senior employees looking for new work as BAC offers no future in Chicago.
4-26-2007 @ 6:03PM
John Smith said...
I think Jon needs to do a little more research; he seems to me missing the point. Why would RBS care so much as to include the Lasalle provision into its bid (a provision which might doom their bid)? Lasalle is not an afterthought, it’s part of the motivation for the bid. It’s insane to think RBS would sell Lasalle after purchasing. Citizens Financial Group, RBS’s American bank (also branded as Charter One in some regions) has been trying to enter the Chicago market (the third largest banking marking in the US) with it’s buyouts of Charter One bank and GreatBanc. RBS has invested a great deal of money trying to get Citizens into Chicago (it funded the Charter One purchase!). Even if you didn’t know this, why would RBS outbid BoA for Lasalle just to turn around and sell it back to them? Did this even sound right in your own head?
7-16-2007 @ 1:57AM
Dave said...
I used to work for BoA in their telesales division as a college student who wants a career in financial services I thought this would be a good entry level entry into the financial services world. I liked working for BoA, and my coworkers were great people even management, who were left over from the takeover of MBNA. A lot of workers there were MBNA employees and they felt loyal to the MBNA brand I didn't see that so much for BoA there new employer. Then on my last day of training for my new job I was told they would be relocating an hour away in a lucritive real estate deal of the old MBNA campus. The nice thing was that they did offer every one a job, but workers started dropping like flys. For some people this would be a 2 and a half hour drive. In the end it was a great experience, and I enjoyed working their because of the great employees there but in the end Bank of America is about one thing, and that is to make money and become the biggest financial services powerhouse in the world.