RBS-ABN-Barclays: Things Get Complicated

Hostile takeover bids are all but unheard-of in the baking industry. But RBS's hostile bid for ABN Amro is not only impressive for its rarity, it's also impressive for its sheer complexity.

For one thing, there are three banks bidding: RBS, Santander, and Fortis. For another thing, they've said that they're going to be able to come up with $50 billion in cash – and it's far from obvious how they're going to be able to raise that kind of money.

And then there's the whole added complication of the BofA bid for LaSalle. The bid does have a go-shop provision, which means that RBS can simply try to outbid BofA for the US bank. But RBS has said that it's not interested in just buying LaSalle; it's interested in all of ABN Amro. And there's the rub, since it's far from clear that the LaSalle sale can be called off unless there's a higher bid for that particular unit.

RBS doesn't want to break its bid up into a bid for LaSalle on the one hand, and a bid for the rest of ABN Amro, on the other. Why? Because an RBS bid for LaSalle would actually increase the value of Barclays' bid for ABN Amro, much of which is essentially being funded through the sale of LaSalle. By bidding for LaSalle, RBS would be handing ammunition to its competitor.

RBS CEO Fred Goodwin is one of the few individuals who has been through a bidding war for a bank in the past, when he bought England's NatWest. This deal is much bigger, and much more complex. But if anybody can navigate the complexities, Goodwin probably can. ABN Amro's shareholders will be cheering him on.