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Commercial banks

Bank of Scotland's Pounds 22bn Hostile Bid for NatWest Faces Uncertainty

Strategic Insights

— 2 min read

Bank of Scotland faces a nervous wait this week to discover whether its Pounds 22bn hostile bid for NatWest will be put in jeopardy by a referral to the competition authorities. The Scottish bank also faces the agony of not knowing if or when its closest rival, Royal Bank of Scotland - perhaps alongside Spain's Banco Santander Centrale Hispano (BSCH) - will decide to launch a counter-attack. The competition authorities are currently deciding whether to refer the bid to the competition commission, a decision that could have far-reaching implications for the future of NatWest and its employees.

Key Takeaways:

  • The office of fair trading has until Friday to announce whether it is referring the bid to the competition commission, although it can ask for an extension of the deadline for a further 15 days.
  • A referral would cause the bid - which is not expected to be blocked by the competition authorities - to lapse, but would not deter other banks from entering the war.
  • Royal Bank is still regarded as the most likely counter-bidder for NatWest, which is twice its size, due to its statement to the stock exchange early in the contest that it was studying the situation closely.
  • The City is scrutinising the relationship between Royal Bank and BSCH, which owns almost 10% of Royal Bank's shares, as a possible supporter of any bid by Royal Bank.
  • A takeover by Royal Bank could involve 30,000 job cuts, more than double the number unions fear will be lost as a result of the Bank of Scotland bid.
  • NatWest is selling off some of its non-core businesses, including the fund management group Gartmore and Ulster Bank, in which Irish Life & Permanent and Bank of Ireland have admitted an interest.
  • Shares in the banking sector have been boosted by the takeover bid and further fuelled by the sudden ousting of the chief executive of Alliance & Leicester, which is now regarded as a potential target.

Statistics:

  • Pounds 22bn: The value of Bank of Scotland's hostile bid for NatWest.
  • 10%: The proportion of Royal Bank's shares owned by BSCH.
  • 30,000: The number of job cuts feared in a takeover by Royal Bank.
  • 1,650: The number of jobs to be axed by NatWest as a result of the Bank of Scotland bid, on top of 10,000 already planned.
  • December 2: The day on which Royal Bank is due to report its profits, the day before the takeover panel's deadline for announcing its decision.

Sources:

  • [No external source was mentioned in the original text]

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