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Commercial banks

NatWest Rejects BoS' Hostile Bid, Waits for RBS' Formal Proposal

Strategic Insights

— 2 min read

NatWest has indicated it will consider talks over recommending Bank of Scotland's hostile bid only if the bid is substantially increased, and the bank provides clear explanations of how cost savings would be achieved. This stance comes as a setback to Bank of Scotland's hopes of gaining a recommendation from NatWest, while Royal Bank of Scotland waits to hear whether the Trade and Industry Secretary will refer its bid to the Competition Commission. Industry sources linked to RBS believe it has adequate firepower to increase its offer if necessary.

Key Takeaways:

  • NatWest has rejected Bank of Scotland's second and improved offer, which consists of 1.75 shares and 190p in cash for each NatWest share, plus a special dividend of up to 120p a share.
  • The offer is worth about $15.01, or $16.21 including the special dividend, with BoS shares at 749p on Friday night.
  • Royal Bank of Scotland's offer, tabled last week and also rejected by NatWest, is 0.968 shares plus 305p cash for each NatWest share, and adds up to $14.74 per share.
  • NatWest's shares sunk 15p on Friday to $14.12, as investors continued selling its shares and buying BoS.
  • Analysts pointed out that BoS' shares rose last week, lifting the value of its offer, while RBS' fell, cutting its value, due to BoS being perceived as a takeover target longer term.
  • RBS is expected to issue its formal bid document either this week or by the start of next, with the Trade and Industry Secretary set to rule on the bid by 29 December.
  • Bank of Scotland's Chief Executive, Peter Burt, is to explain how the promised $250 million IT savings would be achieved in briefings for analysts on Wednesday.

Statistics:

  • The value of Bank of Scotland's offer is $15.01, or $16.21 including the special dividend, with BoS shares at 749p on Friday night.
  • The value of Royal Bank of Scotland's offer is $14.74 per share.
  • NatWest's shares sunk 15p on Friday to $14.12.

Sources:

  • NatWest Bank indicated yesterday it would expect a substantial increase in Bank of Scotland's hostile bid, as well as explanations of how cost savings would be achieved, before it would consider talks over recommending it (Source: Business).
  • Sources close to NatWest, which is faced with rival bids from BoS and the Royal Bank of Scotland, said it was unlikely to reverse its rejection of BoS' bid unless it changed "quite significantly" (Source: Business).
  • Industry sources linked to RBS also believe it has adequate firepower to increase its offer if necessary (Source: Business).
  • A spokesman for BoS said: "If it is feasible for serious talks to take place, they will happen if there is a willingness on both sides" (Source: Business).
  • A spokesman for the Royal Bank declined to comment (Source: Business).

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