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BoS raises NatWest bid
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January 31, 2000: 10:02 a.m. ET
After rival Royal Bank of Scotland hikes offer, Bank of Scotland follows suit
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LONDON (CNNfn) - Royal Bank of Scotland and rival Bank of Scotland each raised their unsolicited offers for English target National Westminster Bank at the eleventh hour Monday. Both put more cash on the table as part of their final bids.
Hours after Royal Bank of Scotland raised its offer for NatWest by about 12 percent, for a total of about 24.9 billion pounds ($40.3 billion), Bank of Scotland responded with a new offer worth about 24.1 billion pounds ($39.1 billion), a 4 percent increase over its previous offer.
Under British takeover rules, both Scottish bidders faced a midnight deadline to increase their offers.
Royal Bank of Scotland's bid is worth about 14.90 pounds per NatWest share, and raises the cash part of the offer by as much as 3.5 billion pounds.
Bank of Scotland's new offer, valuing NatWest at about 14.41 pounds a share, comprises 1.75 new Bank of Scotland ordinary stock units for each NatWest share, or 50 pence in cash and 1.66328 new Bank of Scotland ordinary stock units.
Bank of Scotland said its new terms included a total cash element of 406 pence a share, amounting to about 6.8 billion pounds. The offer includes a cash option of 246 pence per share, up from 190 pence in the bank's previous offer.
"Our offer is the most valuable and the most straightforward," Bank of Scotland Governor John Shaw said. "Our record of performance is significantly better than Royal Bank's."
In Monday trading, shares of all three banks skidded sharply. NatWest slumped 7.3 percent to 1,194 pence, Royal Bank of Scotland tumbled 5.7 percent to 1,003 pence, and Bank of Scotland shed 6.4 percent to 624 pence.
Earlier in the day, NatWest derided the new offer from Royal Bank of Scotland, saying it awaited the competing offer from Bank of Scotland.
"After all the anticipation, this is a damp squib and a risky one," the bank said in a statement.
NatWest shareholders have until Feb. 14 to choose between the competing offers, or opt for independence.
Two options from Royal Bank
In its final gambit, Royal Bank said it offered NatWest shareholders two options, comprising differing ratios of cash and stock. Both options value NatWest at about 24.9 billion pounds, based on Royal Bank's closing share price Friday of 1,060 pence.
The option offering more cash would enlist one of the bank's main European allies, Spain's Banco Santander Central Hispano, to commit 500 million pounds in return for a stake in the combined entity, according to reports.
BSCH's underwriting role, those reports say, might result in the Spanish bank retaining a stake of as much as 10 percent in a combined Royal Bank-NatWest.
CGU, Royal Bank's life insurance partner, will also buy 900 million Royal Bank preferred shares to help finance the bid.
"We have injected more cash into this offer in a way which does not involve dismembering the NatWest business and does not disadvantage any of the shareholders involved," said George Mathewson, Royal Bank's chief executive.
Royal Bank said Monday it increased its basic bid to 0.968 new Royal Bank shares plus 400 pence cash for each NatWest share. Under an alternative offer, Royal Bank said it would pay 0.92 new shares plus 450 pence in cash per share.
Investors accepting either RBS offer would also get what Royal Bank calls Additional Value Shares - a tradable security that guarantees shareholders one pound in cash for each NatWest share until Dec. 1, 2003.
Royal Bank says these shares are worth 70 pence per NatWest share now, making the total offer worth about 1,496 pence per NatWest share.
A combined Royal Bank-NatWest would have assets of $429 billion, placing it second among U.K.-listed banks. HSBC is no.1 in terms of asset size, with $475.5 billion.
RBS's plan differs from its rival's in that it plans to keep Ulster Bank, a retail bank in Northern Ireland, and part of the Greenwich NatWest
Investment banking unit. BoS plans to sell those units, as well as the Gartmore mutual fund business - which RBS also wishes to divest - and hand back the proceeds to shareholders in the form of a special dividend.
In response to the hostile moves by Bank of Scotland and RBS, NatWest has ousted its chief executive and promised to slim its costs and business activities. It has said it intends to repay 3.5 billion pounds in excess capital to shareholders. 
--from staff and wire reports
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