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Scotland

NatWest Takeover Drama: Bank of Scotland Seeks Urgent Deal

Strategic Insights

— 1 min read

A confidential memo reportedly leaked on NatWest's intranet, detailing an agreed deal with Bank of Scotland, has sparked an internal investigation. This move comes as Bank of Scotland launched a £22 billion offer for NatWest, seeking to end hostilities and speculation about a potential takeover. Analysts at Salomon Smith Barney believe that Bank of Scotland's offer is undervalued, estimating the fair value to be £15-£16 per share. Meanwhile, a potential marriage between Royal Bank of Scotland and NatWest offers "the most compelling logic of all the possible deals," with a 40% probability of success.

Key Takeaways:

  • A confidential memo on NatWest's intranet reported an agreed deal with Bank of Scotland, sparking an internal investigation.
  • Bank of Scotland launched a £22 billion offer for NatWest, seeking to end hostilities and speculation about a potential takeover.
  • Analysts at Salomon Smith Barney believe that Bank of Scotland's offer is undervalued, estimating the fair value to be £15-£16 per share.
  • Royal Bank of Scotland's potential acquisition of NatWest has a 40% probability of success, according to Salomon Smith Barney.
  • Analysts rule out cost-cutting bids by HSBC, Barclays, and Lloyds TSB due to competition authority concerns.
  • Abbey National and Halifax have a lower probability of success, at 10% and 5% respectively, due to their vulnerability to counter-bids.
  • An overseas player has a 10% chance of winning NatWest, with the potential to take a significant share of the credit card merchant acquirer market.

Statistics:

  • £22 billion: Bank of Scotland's offer for NatWest.
  • £12.50: Salomon Smith Barney's estimate of the current offer's value per share.
  • £15: Salomon Smith Barney's estimated fair value per share.
  • £16: Salomon Smith Barney's estimated fair value per share.
  • 40%: Probability of Royal Bank of Scotland's success in acquiring NatWest.
  • 35%: Probability of Bank of Scotland's success in acquiring NatWest.
  • 10%: Probability of Abbey National's success in acquiring NatWest.
  • 5%: Probability of Halifax's success in acquiring NatWest.
  • 10%: Probability of an overseas player winning NatWest.

Sources:

  • Memorandum on NatWest's intranet.
  • Bank of Scotland's announcement of a £22 billion offer for NatWest.
  • Salomon Smith Barney's analyst report, not cited as it is a report from the company's employees, citing them at work

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