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Ian Hodges from Barclays Stockbrokers
"Royal Bank of Scotland will have to show its hand"
 real 28k

Friday, 26 November, 1999, 17:02 GMT
NatWest rejects new BoS bid
NatWest BoS logos The struggle goes on, and the gloves are off

NatWest Bank's board has rejected Bank of Scotland's latest offer.

NatWest said BoS continued to undervalue it, despite the offer being raised by more than 3bn to 25.5bn.

"High risk and inadequate reward characterised Bank of Scotland's first offer," said Natwest's Chairman Sir David Rowland.

"The revised offer continues to undervalue NatWest and it has completely failed to address the risks. Shareholders should reject this revised offer."

The move has left the scene set for Royal Bank of Scotland to submit its long anticipated bid for NatWest on Monday.

The increased offer on Friday morning comprised 1.75 new Bank of Scotland shares plus 1.90 in loan notes per NatWest share.

Bank of Scotland said it also planned to pay a special dividend of up to 1.20 per NatWest share once it had sold off Ulster Bank, Greenwich NatWest and Gartmore.

Clock ticking

The offer values NatWest at about 15.32 per share, rising to 16.52 per share, or a total of 27.58bn, including the dividend.

On Thursday, the Trade Secretary, Stephen Byers, announced that he would not be referring Bank of Scotland's hostile bid to the Competition Commission.

He said the decision had been recommended by the Office of Fair Trading (OFT).

If the OFT had thought the deal would be bad news for competition in general or consumers, it would have been referred, delaying the proposed takeover for months.

Explaining why he did not have concerns, Mr Byers said: "The parties have branch networks which are concentrated in different areas of the country, and they face significant competition from other institutions over a range of their services."

Abbey rumours

The clearance set the clock running once again on the takeover, giving NatWest a few days to make public all "significant financial information" relating to its defence.

There has been an increasingly bitter battle of words between directors of the two banking chains since the bid was announced.

Bank of Scotland has said its bid will lead to cost savings of at least 1.02bn for the combined group.

BoS head of IT, Chris Brobbel, said: "Banking is one of the most rapidly changing industries in the world today.

"It is technology that is driving the change and it is technology that will separate the winners from the losers. NatWest's 'can't do' attitude speaks volumes about its approach to technological development."

Royal Bank of Scotland has been watching the process from the sidelines, and it is understood to be planning a bid to try to pip its national rival for the NatWest scalp.

Abbey National and some American banking groups are understood also to be interested.

If another player enters the fray, the price for NatWest will go up even further.

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See also:
19 Nov 99 |  Business
NatWest bid timetable frozen
08 Oct 99 |  The Company File
NatWest chief executive ousted
27 Sep 99 |  The Company File
Q&A: NatWest takeover bid
08 Nov 99 |  The Company File
Rival bid for NatWest moves closer

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