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BoS revises NatWest bid
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January 27, 2000: 8:50 a.m. ET
Bank of Scotland 'boosts' bid to $40B, adding more cash; Royal Bank poised
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LONDON (CNNfn) - Bank of Scotland revised its hostile takeover bid for National Westminster Bank Thursday in a move widely seen as raising the cash element of the deal and valuing Britain's third-largest bank at 24.3 billion pounds ($39.9 billion).
The new offer was meant to clarify the bid by replacing the "special dividend" with a guaranteed special stock unit.
The move puts pressure on Edinburgh-based rival Royal Bank of Scotland to increase its own offer for NatWest before the deadline on Jan. 31.
Bank of Scotland said its new offer is worth 1,456 pence a share, some 10 percent above the RBOS bid of around 22 billion pounds. "It really shows Bank of Scotland is determined to win this one," said Andrew Hobson, banking analyst at brokerage Capel-Cure Sharpe.
He believes that Bank of Scotland may still raise its bid before the deadline, and the bank did say in its latest document that it reserved its right to do so.
The bank's chief executive, Peter Burt, also said Thursday the bank had the resources to increase its bid to pay what it thought National Westminster Bank was worth.
The decline in the share prices of both Scottish banks over the past few months has put pressure on them to sweeten the cash element of their stock-dominated deals before NatWest shareholders vote on the future of their bank on Feb. 14.
Bank of Scotland launched its original bid for NatWest on Sept. 24 of last year and then raised it by 20 percent on Nov. 26. Its larger rival Royal Bank of Scotland joined the race on Nov. 29.
Bank of Scotland's latest offer retains the equity element at 1.75 of its own shares, but removes a one-time special dividend worth 120 pence a share and replaces it with a special stock unit.
Hobson said investors had difficulty valuing the dividend - to be funded by selling NatWest assets - and had either discounted it or left it out of their assessment altogether.
He said the special stock unit, worth between 126 pence and 132 pence a share and payable in cash, added about 7 percent to the value of the Bank of Scotland bid.
Investors took time to digest the latest twist in Britain's most keenly contested bank battle. NatWest is fiercely resisting both offers and has built a defense based on a new management team and returning cash to shareholders via a buyback and asset disposal program.
NatWest (NWB) shares climbed 5.5 percent to 1,300 pence. Bank of Scotland [LSE:BSCT rose 2.65 percent to 679 pence.
Royal Bank of Scotland is widely expected to raise its own NatWest bid before next Monday. Analysts predict that support from BSCH, Spain's largest bank and Royal Bank's largest shareholder, will allow it to add an even larger cash element to its offer.
Royal Bank (RBOS) shares rose 2.9 percent Thursday to 1,062 pence. 
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