Sunday, August 5, 2007

Fortis shareholders sharpen knives for ABN

Fortis wants to buy ABN Amro, but is it a wolf in lamb's clothing?

What would Max Havelaar do?

Non-business-types can tune out now.

While to some, Fortis's shareholder meeting(s) Monday might like just another squabble in the jackal vs. vulture fracas to buy ABN Amro, to me it looks like high noon in Dodge City.

A Fortis approval will mean the consortium's "weakest link" has held, and the RBS-led bid of at least 10 percent more than Barclays' offer will very likely end up winning ABN Amro. Because: if I offer you your choice of $90 or $100, which would you choose? Now ask yourself the same question, and add the word "billion" after those numbers. That's more or less the situation.

On the other hand, a surprise rejection by Fortis shareholders would mean chaos for the RBS-Fortis-Santander consortium, dogs and cats living together, mass hysteria. Their bid could fall apart. Of course, maybe they have a "Plan B" ready for just that scenario. I can't think of what that plan would be, but then: I'm not a financial journalist. I just play one on TV.

At any rate, things would get exciting.

I mean, exciting in terms of a banking deal. It's relative.

The protagonists, or antagonists, depending on which side you take, have made all their moves and the very, very, very smart money probably already knows which way the vote at Fortis's shareholder meeting will work out.

I personally have no idea. Looking at the share prices all around, and forgetting about little niggling details like "arbitrage," it looks like the market is betting the Fortis share issue will be approved.

Clear your mind of the present situation and look at the history of big acquisitions with a high premium like the one Fortis's shareholders are being asked to approve. You'd have to think: if this were my company issuing stock like that, I'd be running for the door.

Hence the massive Fortis share decline since they entered the bidding back in April. Scaredy cats such as the fictional me have already run away.

Conversely, a Barclays' emission of even greater size should have a dramatic negative effect on its shares. No such massive decline at Barclays, just a minor one. So, again, the market thinks Fortis will mostly likely win, i.e., Barclays will lose, and so, no selloff in Barclays shares.

However, speaking as someone who went to the casino this week and walked away with a whopping EUR25, I'm thinking about the following:

If someone with lots of money to play around with _ call him Donald Trump, Rupert Murdoch, or whomever you will _ was interested in earning a little jack without much work, all he would have to do is buy, say, EUR8 billion worth of Fortis shares in order to have a comfortable blocking minority.

This Dupert Turdoch votes against the emission and *hey presto* Fortis stock is up at least 10-15 percent overnight, and he's netted himself a healthy profit. Maybe more if this Rupald Mump has got huevos grandes and has also shorted Barclays shares.

The only problem with this cunning plan is that, someone would *surely* have noticed had Fortis's shares been under accumulation to the tune of 1/5 of its total share capital.

A paltry 11 million Fortis shares traded hands Friday, I assume that was a heavy volume. At around that rate, every single Fortis share sold for the past month would have had to have fallen into the hands of Turdoch and his cronies for them to have a blocking stake.

Not bloody likely.

But imagine that this Turdoch _ a visionary _ saw this scenario developing, say, back in early June. Then it's two months to get ready. And in addition, he's been borrowing stock to vote those shares too, making deals with big Fortis shareholders and pulling other sharky shenanigans.

It's a crazy plan; he would have already taken quite a whuppin' on the stock fall even since June, but a big pop Monday could more than make up for that (especially in combo with a big short position in Barclays).

So, in summary: this is all a very hypothetical scenario, and the markets tend to suggest that things will simply go the other way. The more I think about it, the more it seems like this is a done deal for RBS and co.

Put a fork in it.

But: a wacky upset would sure make for a good story.

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