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The BBC's Rory Cellan Jones
"Today Royal Bank of Scotland has launched it's bid"
 real 28k

Rory Murphy, joint General Secretary of UNIFI
"Staff don't want to be chips in a card game anymore"
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Monday, 29 November, 1999, 22:20 GMT
NatWest rejects second bid
NatWest NatWest now faces a bidding war

NatWest Bank's board has rejected a takeover bid by Royal Bank of Scotland (RBS).

But the polite tone of the rejection was seen as signalling that a link-up between the two UK banks may be likely if and when RBS raises its offer.

The Scottish bank launched a 26.4bn hostile bid on Monday after NatWest directors rejected a friendly approach at the weekend.

The offer was made in a mixture of cash and shares and trumped an increased bid of 25.5bn made on Friday by Bank of Scotland, the bank which opened the bidding war for NatWest.

Under the proposal, NatWest will keep its name and branding. NatWest did not reject the offer outright.

Assets: 186bn (1998)
Profit: 2,142m (before tax)
Staff: 64,400
Branches: 1,730
But after a day spent considering the merits of the fresh offer, the NatWest board issued a very brief statement describing it as "inadequate" and recommending shareholders reject it.

The earlier Bank of Scotland(BoS) bid has led to a running war of words with the NatWest and BoS boards ridiculing each other's records and abilities.

Royal Bank of Scotland offers 0.968 new Royal Bank shares for each NatWest share plus a 305 pence loan note. This is the equivalent of 15.90 for each share and trumps Bank of Scotland's offer of 14.57 per share, if its plans for a special dividend are excluded.

Royal Bank's bid is at a premium of 4.7% to NatWest's closing share price on Friday of 15.18.

The fact that the Royal Bank of Scotland had been forced to go hostile contributed to a lukewarm market reaction to the bid.

NatWest shares fell 38 pence, or 2.5%, to 14.80 while Royal Bank of Scotland stock was also down, falling 58 pence or 4.4% to 12.70 per share.

Sir David Rowland, chairman of NatWest plc, rejected the Royal Bank's friendly approach at the weekend. The "board considered that the proposal did not justify a recommendation from the board, and so we rejected the offer".

Royal Bank of Scotland
Assets: 75bn (1998)
Profit: 1.21bn (before tax)
Staff: 22,000
Branches: 650
Speaking at a news conference on Sunday, Sir David said the merger proposal had been made on Friday evening and rejected during a full board meeting on Saturday.

If successful, the merger with Royal Bank of Scotland would see a bank with a market capitalisation of 12bn and assets of 75bn in 1998 take over a bank with more than twice the market value and 186bn of assets.

Bank of Scotland vs Royal Bank of Scotland

A string of poor results have made NatWest a prime take-over target.

Bank of Scotland
59.8m (1999)
Profit: 1.01bn (before tax)
Staff: 21,000
Branches: 325
The latest round in the takeover battle came when BoS raised its offer on Friday by more than 3bn to 25.5bn.

With all three sets of management keen to demonstrate the future is best in their hands, much of the arguing has come down to the number of jobs and costs which can be cut.

Royal Bank of Scotland expects cost savings of 1.18bn. Its rival bidder Bank of Scotland forecasts savings of 1.015bn, while NatWest itself says it can shave costs by 525m.

Under the Royal Bank proposal, NatWest shareholders would hold 62.2% of the new group, compared to the 75% suggested in the Bank of Scotland plan.

Defensive moves

NatWest, meanwhile, has released its defence document rejecting Bank of Scotland's bid.

Shareholders are promised 1bn as part of a share buy-back scheme, and increased dividend payouts.

All this will be financed through the sell-off of debt markets group Greenwich NatWest, funds manager Gartmore, Ulster Bank and NatWest Equity partners and the closure of a further 200 branches.

Dramatic job cuts are part of the package and would reduce the staff of what remains of the company by 15,000 to 27,400. This is 5,000 more than previously announced.

Ron Sandler, Nat West's chief operating officer, said the merger proposals of the bank's Scottish rivals would fail to create the value and unlock the savings already owned by NatWest shareholders.

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See also:
29 Nov 99 |  Business
Royal Bank warns of job losses
29 Oct 99 |  Business Basics
Mergers, how do they happen?
27 Sep 99 |  The Company File
Timetable of a takeover
27 Sep 99 |  The Company File
Banking on size to compete
29 Nov 99 |  Business
NatWest to keep name
29 Nov 99 |  Business
CGU in NatWest pensions move
07 Oct 99 |  The Company File
BoS plans 1bn cuts at NatWest

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