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Opinion

Abigail Hofman: Where eagles dare

Has the eagle landed? Last Tuesday, Vino Timmerman, advocate-general to the Dutch Supreme Court, argued that ABN Amro should be allowed to sell its US subsidiary LaSalle to Bank of America without shareholder approval. Although the advocate-general’s opinion is not binding on the Supreme Court, it is generally followed. The court will provide its own verdict in mid-July.

Vino Timmerman is one of those tricky names that tend to confuse me. I would always be tempted to call him Tiny Vimman. However at this juncture, is it fair to say: “In vino veritas”?

Vino’s judgement favours a Barclays takeover of ABN Amro. Commentators assume that the RBS consortium is not enamoured of the ABN carcass denuded of its American leg. The question floating in the ether is: Will Fred flee or fight? A source grumbles: “It is inconceivable to me that RBS would want ABN without LaSalle. LaSalle joins up the dots for them in the US.” RBS America is the sixth largest bank by assets in the US and brings together the former Citizens Financial Group and RBS’s American global, banking and markets division. An insider commented that LaSalle would be a “neat fit, although not a necessity” because its corporate business would complement Citizens’ retail focus.

Feisty Fred is not someone who fails. Nevertheless, supposing he does flounce off from the ABN tug of war; where does that leave Barclays? In the middle of nowhere, some argue. Barclays’ share price stumbled (off some 3%) in the three days following Vino’s bombshell. We’ve already had the moaning minnies at activist hedge fund Atticus Capital complaining that Barclays and ABN is a black-hole combo. And by the way, Atticus owns approximately $1 billion-worth of Barclays stock at a price that must be out of the money. Don’t expect Bob Diamond or John Varley (Barclays’ president and chief executive) to cry for Atticus (or should that be Argentina?).

Opponents of a Barclays’ bid argue that integration will mean distraction. That may be true, but what is the strategic alternative for Barclays? Despite its advertisements at the turn of the century extolling the virtues of being a big bank, Barclays may not be big enough. For example, it ranks a lowly sixth in the global syndicated loan table, year-to-date. A merger with another major European firm (say Credit Suisse or Deutsche) would bring too much overlap and too many competing egos. A Bank of America/Barclays marriage could work, but canny Ken (Lewis, Bank of America’s chief executive) is sitting on his hands and muttering about the vagaries of a two-dollar pound.

A mole whispers that the two suitors have very different management cultures. “John Varley empowers his guys,” mole mouthed. “Whereas at RBS, all roads lead to Fred. Fred’s attention to detail is incredible: he has daily morning meetings with his key reports.” Is that good or bad? I’m not sure. Strong hand on the tiller or pedantic boss presses his nose against the window-pane?

Indeed, Barclays is in such a laid-back mode it may mislay the eagle. The eagle has been the symbol of Barclays bank for over 300 years. ABN employees have developed eagle aversion on the grounds that the logo is similar to the symbol used by the Nazis who occupied the Netherlands during World War II. In an attempt to cuddle up to Rick, (Rijkman Groenink, ABN’s chairman of the managing board), John (Varley) has indicated that the eagle could be replaced by the ABN shield when creating a logo for the new group. And you thought these mergers were all about shareholder value?

Fall like a stone

And talking of shareholder value, what happened to it in the Blackstone deal? Two weeks ago, the Blackstone flotation was being described as the deal of the decade. Last week, it looked more like a dead duck. I should have listened to Fred. Fred is a fund manager who invests money for middle America. He warned me that his clients were boycotting Blackstone shares because they were appalled by the lavish lifestyle of the firm’s senior management. The day before launch, I thought Fred was being pious; three days after launch, I concluded he was prophetic.

Blackstone was priced at $31 and was more than 7 times oversubscribed. In the first day’s trading it spiked at $38, before collapsing like a punctured punch-bag to settle around the $30 level. Steve Schwarzman, Blackstone’s chief executive is sitting pretty. He sold shares worth $600 million at the flotation. What about those investors who bought in the first day of frothy trading? They could have lost 25% in a week. It was David Rosenberg, Merrill Lynch’s chief North American economist, who broadened the specific to the general when he said: “One must wonder if we will look back at the fact that Blackstone shares were trading below the IPO price a mere two days following the offering as the inflection point for this M&A/private equity wave that has under-pinned the market.”

The pleasant peril of working at Merrill

Last Wednesday, Merrill Lynch’s chairman and chief executive, Stan O’Neal was discussing industry trends at the Euromoney forum. Mr O’Neal was in an optimistic mood. He talked about the buoyancy of the investment banking industry, where there is simultaneous strength in many different sectors. He also stated that problems in the sub-prime mortgage area were “reasonably well contained” and not affecting other sub-sets of the bond market. O’Neal thought that private equity would continue to be an important force partially because interest rates are low historically. And he was positive about the opportunities in non-US markets such as China, India and Japan. “I have never seen a time of such seemingly sustainable growth,” he said. “I have never seen a time when there was so much connection between these markets.”

Stan is special. Before the session started, I was chatting to the delightful and down-to-earth Amir Hoveyda, Merrill’s recently promoted head of financial institutions. As a journalist I am paid to observe, so I kept a beady eye on Mr O’Neal. And I noticed that O’Neal was doing the same thing: while talking to Euromoney’s editor, he was scrutinising the audience. “Stan is the most contemplative and respectful CEO on Wall Street,” an insider told me. “By most respectful, I mean he actually listens to what people say and responds. I have worked for other top CEOs and have never seen this before. With most of these guys, your question winds up being a convenient means for them to talk about themselves or lecture you. Stan is much more conversational. It is obvious he is thinking something through with you.”

Mr O’Neal is, of course, absurdly handsome for a banker. “Over-qualified in the looks department,” a mole chuckled. Financiers tend to be small, rotund and ugly, with one redeeming quality: wealth. Stan is tall, lean and attractive, with the additional bonus of wealth. “Does the man have an unnecessary ounce of body fat?” I asked myself glumly as I looked at him on the podium. Meanwhile, my Prada skirt hugged my hips too snugly after a week of super-sized eating in New York. I’m beginning to think Stan could create another revenue stream at Merrill by starting a male model agency. Instead of Models One, it could be called Merrills One. Founder members (or should that be models?) would be Andrea Orcel, head of global origination, and co-president Greg Fleming. Merrills One would be a deliciously counter-cyclical business: sex stays in fashion even when markets plummet. What do you think?

Next week: I catch up with the triple Cs (Chad, Charlie and Carvalho of Citi). Please send news and views to abigail@euromoney.com

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