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NatWest bid raised to $41B
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November 26, 1999: 11:56 a.m. ET
Bank of Scotland raises hostile offer after regulators' OK; rival bid expected
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LONDON (CNNfn) - Bank of Scotland raised its hostile takeover offer for National Westminster Bank by 20 percent Friday amid expectations that a rival bid could still emerge.
Bank of Scotland boosted its offer to stock and note offer to around 25.6 billion pounds ($41.2 billion) a day after U.K. regulators gave the green light to the original bid.
However, analysts said the new deal was not a knock-out offer, and although Bank of Scotland has until Dec. 3 to post another offer, attention shifted to other possible bidders, notably Royal Bank of Scotland which has already expressed interest.
"It's a good offer, but it's probably as far as Bank of Scotland can go," said analyst Andrew Hobson of broker Capel Cure Sharp. "RBS will probably step in as a kind of white knight," he added.
Natwest quickly rejected the latest offer as inadequate. In a brief statement, Natwest Chairman David Rowland said the revised offer "continues to undervalue Natwest and it has completely failed to address the risks.
"Shareholders should reject the revised offer," he said.
NatWest has to release its final defense document by Saturday night, and analysts said the tight timetable could still drive it into the arms of Royal Bank of Scotland (RBS).
NatWest shares climbed 3.8 percent to 1,520 pence while Bank of Scotland stock slipped 6 percent to 721 pence. RBS shares were 0.9 percent lower.
Special dividend boosts offer
Bank of Scotland's new offer is made on the basis of one NatWest share for every 1.75 Bank of Scotland shares, 190 pence in loan notes and a 120 pence special dividend.
Analysts believe that Royal Bank of Scotland can pay a higher price than its Scottish rival and squeeze more cost savings from the deal because it has a greater overlap in its branch network with NatWest.
RBS refused to comment on its plans Friday, but the bank said its chairman, Viscount Younger, would retire in January. The retirement is seen as increasing the chances of a Royal Bank bid for NatWest, because George Younger was thought to have cautioned against such a move.
Bank of Scotland's previous offer, which lapsed while regulators were checking out antitrust concerns, was made in mid-September, and was worth 20.85 billion pounds. The latest offer is at a 58 percent premium to where NatWest shares were trading before the first bid was launched.
Bank of Scotland's latest bid follows U.K. Trade and Industry Secretary Stephen Byers' decision on Thursday to clear its first offer on competition grounds.
Harsh words exchanged
Bank of Scotland's approach has led to harsh words between the two companies; with the Scottish bank making it plain that it believes NatWest's leadership has mismanaged the bank.
NatWest reacted to the bid by ousting its chief executive, Derek Wanless, and announcing plans to sell several divisions.
Bank of Scotland Governor (chairman) John Shaw said he hoped the NatWest board would recommend the revised bid, and invited them to join Bank of Scotland for talks.
"These terms reflect BoS's confidence that it can run NatWest better, improve its performance, and transform its future profitability," he said in a statement. 
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