Barclays lifts ABN offer with China, Singapore help

British bank Barclays raised its bid for Dutch group ABN AMRO to €67.5 billion this week, helped by some of the biggest ever overseas investments by China and Singapore.

China Development Bank, whose main function is to make loans in support of Chinese government policies, and Singapore state investor Temasek agreed to invest up to €13.4 billion in Barclays to aid its fight for ABN.

Barclays said its new bid for ABN included €24.8 billion in cash and was up from its previous all-stock offer of E65 billion.

The offer is still below a rival €71 billion bid from a group of European banks led by Royal Bank of Scotland (RBS) but, Barclays said it expects the value of its offer to rise and indicated it has no plans to sweeten its offer further.

"We've put an enticing cream cake on the table for ABN shareholders, we are not going to top it up with cream," John Varley, Barclays chief executive, said at a press conference.

"We feel no need to do anything further."

A deal with either Barclays or the RBS team, which includes Spain's Santander and Belgian-Dutch group Fortis, would be the biggest ever bank takeover.

Analysts and investors said Barclays was playing a shrewd game, signalling it would not engage in a destructive bidding war and also boosting its shares to help win the day.

"Royal Bank of Scotland is still the favourite, but the odds are a little bit different to what they were on Friday," said Colin Morton at Rensburg Fund Management, a holder of both Barclays and RBS stock. "The crux is whether shareholders want to participate in the deal or not... you would think people would take the cash and run, unless Barclays can convince people how much benefit they can get out of it if they stick around," Mr Morton added.

Barclays, Britain's third-biggest bank, said its new offer had not been recommended by ABN, but, Mr Varley said he hoped and expected that the offer is conditional on being recommended by ABN's boards. Mr Varley declined to comment on whether he would withdraw if it doesn't get their backing.

ABN has come under pressure from some shareholders to back the higher RBS consortium bid and said it was assessing both offers. But it noted the planned strategic cooperation with China and Singapore would boost the growth opportunities available to the combination with Barclays.

An initial investment by them of €3.6 billion will be used by Barclays to buy back shares during the takeover process, which analysts said would help underpin its share price.

The remainder of the investment from China Development Bank and Temasek, almost €10 billion, will be made if Barclays wins ABN.

Barclays also reported a 12 per cent rise in first-half pretax profit to £4.1 billion.

Some shareholders have urged Barclays to scrap its bid, but Barclays said it retained the support of investors and its revised offer and investment from China should dispel fears it might be drawn into a bidding war or issue shares at a discount.

"Both those ghosts have been exorcised," Mr Varley said. "What matters is where our stock will be trading when ABN shareholders have to make their decision, and I think we've made their decision easier in favour of Barclays."