The last time a rival bought ABN Amro, it blew up the European banking system. BNP's tilt at the 10 billion euro state-owned Dutch lender may revive those memories. A cheap stock and simpler logic argue for a second go, says liamwardproud.
, and remains a basket case to this day. Fortis, which overextended itself by swallowing ABN’s Dutch unit, was rescued by the Belgian state and quickly sold to BNP.
It wouldn’t be hard for Bonnafé to beat such an unhappy track record. For starters, ABN is cheap: Even with a 30% equity premium BNP could pick it up for 12.6 billion euros, or around 60% of forward tangible book value – roughly the same as the French bank’s own multiple. Buying a lender for less than the accounting value of its net assets also creates a capital gain – known as badwill – which the acquirer can use to cover merger costs and clean up bad debt.
Bonnafé may yet have better uses for the bank’s excess capital, such as growing its loan book or investing in new technology systems. And it’s far from clear that the Dutch government would cede control of one of its biggest lenders, especially given what happened last time. Yet far from angering the ghosts of M&A past, there’s reason to think Bonnafé could put them to rest.
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