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Scotland

Royal Bank of Scotland Could Afford to Pay Much More for NatWest

Strategic Insights

— 2 min read

Royal Bank of Scotland could have paid £29.7bn for National Westminster, more than its arch-rival Bank of Scotland's £21.3bn bid, according to research by a leading City merchant bank. The study suggests that Royal's more highly rated shares by the stock market could have allowed it to pay up to 1780p per NatWest share, valuing the 'big four' bank at £29.7bn, assuming it was to put all its £2.6bn of cash on the table. Bank of Scotland's shares-and-loan-note offer, announced on Friday, was worth 1279.2p per NatWest share last night, with NatWest shares slipping 7p to 1416p yesterday.

Key Takeaways:

  • Royal Bank of Scotland could have paid up to £29.7bn for NatWest, exceeding Bank of Scotland's £21.3bn bid.
  • The research suggests that Royal could have paid up to 1780p per NatWest share, assuming it put all its £2.6bn of cash on the table.
  • Bank of Scotland's bid, with a £2bn cash element, would be valued at up to 1500p per share.
  • Abbey National could go up to 1520p if it were to put up cash of £3.1bn.
  • The three potential bidders - Royal, Bank of Scotland, and Abbey National - have upper limits for their bids, which could change with share price movements and estimated cost savings.
  • The banking analyst behind the research notes that Royal's perceived advantage could lead to a 'game over' situation if it makes a big offer.
  • Royal has said it is 'watching the situation as it develops,' with its chief executive, Sir George Mathewson, meeting with advisers in London during the week.

Statistics:

  • Royal's bid: up to £29.7bn for NatWest
  • Bank of Scotland's bid: £21.3bn for NatWest
  • Royal's estimated cost savings: £430m
  • Bank of Scotland's estimated cost savings: £400m
  • Abbey National's estimated cost savings: £600m
  • Royal's upper limit for the bid: 1780p per NatWest share
  • Bank of Scotland's upper limit for the bid: 1500p per NatWest share (with £2bn cash) and 1540p per NatWest share (with £2.6bn cash)
  • Abbey National's upper limit for the bid: 1520p per NatWest share (with £3.1bn cash)

Sources:

  • [Research by a leading City merchant bank, no specific source cited]
  • [Royal Bank of Scotland's statement on watching the situation, no specific source cited]
  • [Bank of Scotland's announcement on Friday, no specific source cited]
  • [NatWest's share price movement, no specific source cited]
  • [Abbey National's share price movement, no specific source cited]
  • [Graham Wood, head of UK equities at Standard Life, no specific source cited]
  • [Well-informed source, no specific source cited]
  • [Ray Perman, chief executive of Scottish Financial Enterprise, no specific source cited]

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