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NatWest Launches Scathing Attack on Bank of Scotland Management

Strategic Insights

— 1 min read

NatWest's executive team questioned the leadership of Bank of Scotland after revealing a reversal of attitude by BoS directors during secret talks last Friday. The talks between the two banks at London's Savoy hotel raised serious concerns about Bank of Scotland's judgment. The proposal by Bank of Scotland to merge with NatWest has been met with skepticism, with NatWest stating that their standalone strategy offers greater value and substantially lower risk than BoS's proposals.

Key Takeaways:

  • NatWest's chairman and chief executive, Sir David Rowland, accused Bank of Scotland's management team of reversing their strategy and admitting to mistakes.
  • The meeting between the two banks at the Savoy hotel revealed a "complete reversal of attitude" by Bank of Scotland's management, raising questions about their leadership.
  • Bank of Scotland's chief executive, Peter Burt, denied that the bid to open talks represented a strategic U-turn, stating that the door remains open for substantive discussion.
  • NatWest's management viewed the BoS offer as having "significantly less certainty of delivery" and "highly risky" systems integration plans.
  • The rivalry between the two Scottish banks led to NatWest accusing them of leaking information to the press, with claims that if not for BoS's intervention, NatWest would have issued approximately 25% of its equity at a value of $11.43 to acquire Legal & General in September.

Statistics:

  • The price of the derailed L&G deal was $11.43 per share, compared to the current value of $15.14 per share that BoS is putting on NatWest.
  • A special dividend to NatWest shareholders from future asset sales would add $1.20 to the value, making it $16.34 per share.
  • Approximately 25% of NatWest's equity was to be issued for the acquisition of the L&G deal, which would have valued it at $11.43 per share.

Sources:

  • "Bank of Scotland offers merger talks to NatWest," by Martin Flanagan, The Scotsman
  • "NatWest hits out at BoS bid after meeting," by Martin Flanagan, The Scotsman
  • "BoS: NatWest would have sold shares for L&G deal at lower price," by Martin Flanagan, The Scotsman
  • "L&G deal price: Scottish deal done at lower price than current proposals."

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