Merger bells ring for Barclays, ABN

In the worlds biggest-ever financial- services takeover, Barclays, U.K’s third- largest bank, agreed to buy ABN AMRO Holding NV for $91 billion. In a related deal, Bank of America Corp. agreed to buy ABN AMRO Holding NV's LaSalle unit for about $21 billion.

Barclays's acquirement of the Dutch Bank ABN AMRO will create a banking behemoth with almost 230,000 employees and more than 8,200 branches. Meanwhile, Bank of America’s acquirement of LaSalle will increase the formers market share in Chicago, vaulting it past JPMorgan Chase.

LaSalle Bank Corporation is an indirect subsidiary of Netherlands-based ABN AMRO Bank. N.V. LaSalle Bank Corporation in turn is the holding company for LaSalle Bank N.A. The latter is the largest bank headquartered in Chicago with $72.2 billion in assets and $46.8 billion in deposits. LaSalle was established in 1927 as the National Builders Bank of Chicago and acquired by ABN AMRO in 1979.

ABN AMRO Chief Executive Officer Rijkman Groenink had been under enormous pressure from shareholders like TCI Fund Management LLP to consider breaking up the company given the sagging share price. Barclay bid 36.25 euros a share, 33 percent more than ABN AMRO's closing price on March 16, the last trading day before the talks were announced.

Barclays CEO John Varley said, "The proposed merger represents a unique opportunity to create a new competitive force in financial services, which will deliver benefits for our customers and clients." Meanwhile Groenink said that Barclays is "the best partner" for ABN AMRO.

It is still possible that rival bid may be made by a group led by the Royal Bank of Scotland. This group is scheduled to meet with ABN on Monday. Royal Bank of Scotland and its partners, Santander and Fortis are considering a breakup of ABN AMRO.

Santander, Spain's largest bank, would take the Latin American business as well as ABN AMRO's Italian holdings. Meanwhile Fortis, based in Brussels may keep the Dutch operations as well as the private equity and private banking arms.