Amsterdam, 30 January 2001
ABN AMRO announces that it has reached agreement with ING Group to purchase the prime brokerage, corporate finance, domestic equities, and futures and options businesses of ING Barings in North America. The acquisition will enable ABN AMRO’s Wholesale Clients business to further strengthen the service it offers its chosen clients worldwide and to accelerate its plans for the North American market.
ABN AMRO has agreed to pay - subject to final regulatory approvals and completion of the transaction - a total consideration of USD 275 million for the ING Barings businesses, comprising net asset value plus a goodwill payment of USD 12 million. A retention pool of USD 80-100 million is being established to tie in certain key employees. The acquisition will be funded from internal sources.
After integration with the relevant ABN AMRO businesses, the bank’s prime brokerage, equities and corporate finance businesses in the US will break even in 2001 and make a positive contribution to economic profit (net profit less risk adjusted capital charge) from 2002. Integrating the businesses and their operational platforms will generate annual cost savings in excess of USD 20 million from 2002.
The decision to acquire these businesses - and to invest in further developing the bank’s capabilities in North America - is in line with ABN AMRO’s Wholesale Clients strategy. This is to offer a globally integrated corporate and investment banking service for its chosen corporate, financial institution and public sector clients. Furthermore, the deal directly supports initiatives already targeted and underway in ABN AMRO’s existing North American wholesale businesses.
The corporate finance and equity sales, trading and research business being acquired fit well with ABN AMRO’s existing operations, and the highly regarded prime brokerage franchise - formerly part of Furman Selz - adds significantly to ABN AMRO's offering to hedge funds. It will give the Wholesale Clients business sufficient critical mass in North America to further develop the range of products it can offer in the region to its selected clients. This will be underpinned by a commitment to invest further in the newly integrated business over the next two years.
Specific benefits of the transaction are:
- ABN AMRO’s existing commitment to develop prime brokerage - a fast growing and high margin business - is well served by acquiring
- ING Barings’ businesses. Further investment will enable ABN AMRO to extend this product further in the US and roll it out to Europe and Asia, significantly increasing the liquidity it can offer the hedge fund industry, expanding its access and insights to capital flows, and enhancing its substantial European stock lending franchise. This business fits well with ABN AMRO’s recently formed Clearing & Execution Services business in North America, which targets professional traders, financial institutions and hedge funds.
- ABN AMRO’s focus on key global sectors is matched by a similar strategy at ING Barings North America, especially in equity research and corporate finance. Its strengths in a number of sectors, including media, energy, telecoms, industrial manufacturing and healthcare, complement ABN AMRO’s existing sector coverage and this has the potential to enhance revenues from origination.
- The number of US stocks followed by ABN AMRO will double from current levels and this combined coverage will further enhance the firm's overall research profile around the world.
- Adding the new businesses will facilitate ABN AMRO's planned expansion of equities trading and sales trading in North America. In addition, ING Barings’ NASDAQ market making operation will enable ABN AMRO to boost its trading capacity threefold over the next two years.
- The advanced operational platform being acquired from ING Barings will be integrated with ABN AMRO’s back offices, helping to reduce cost per transaction and allowing ABN AMRO to compete more effectively with its global peers. The acquisition will allow ABN AMRO to consolidate its New York-based Wholesale Clients activities into one building.
The businesses being acquired, which currently have around 1,300 employees, will be combined with ABN AMRO’s existing Wholesale Clients operations, which employ around 2,600 in the US, as soon as possible after completion. Reduction in personnel will be implemented to ensure that maximum value is created for ABN AMRO and that the bank’s strategic objectives are realised. A senior management team has been deployed to ensure that integration is rapid and smooth. All the businesses being acquired will be branded ABN AMRO.
Rijnhard van Tets, Chairman of ABN AMRO’S Wholesale Clients business, said:
“On examination, it became readily apparent how well these businesses complemented our existing plans in North America. The acquisition strengthens the product capabilities we can offer our global clients and provides us with a stronger platform on which to build our presence in the US market. It is a quicker and cheaper way of growing our US activities than doing so independently. It fits well with our stated goal of hiring senior professionals in our chosen client and product segments.”
Nick Bannister, Global Head of Equities, added:
“This acquisition is a good opportunity from a competitive standpoint. It offers speed, great complementarity, a sound team of professionals in areas important to us, good incremental revenues, digestible size and an attractive infrastructure.”
Note to editors:
ABN AMRO is one of the world’s largest banks with total assets of more than USD 500 billion and more than 3,500 locations in 70 countries and territories. Its activities are grouped into three strategic business units: Wholesale Clients, which provides integrated corporate and investment banking services to corporate, financial institutions and public sector clients worldwide; Consumer & Commercial Clients, which focuses on retail and SME clients in a number of core markets; and Private Clients & Asset Management, which focuses on private banking and fund management clients globally.
ABN AMRO in the US
ABN AMRO is one of the three largest foreign banks in the US. It has a leading presence in the Mid-West and New York metropolitan banking markets through its subsidiaries LaSalle Bank in Chicago, Standard Federal Bank in Michigan and EAB in New York. In November 2000, it announced an agreement to buy Michigan National Corporation for USD 2.75 billion.
In wholesale banking, ABN AMRO employs around 2,600 in the US. It offers an integrated corporate and investment banking service to North American clients in selected sectors, with a focus on cross-border transactions and investment flows. Key activities - in addition to those being integrated with the ING Barings businesses - include distribution of European and Asia equity and fixed income securities in the US market; corporate banking; international operational services (such as cash management and trade finance); and clearing and execution services for the equities, options, futures and foreign exchange markets provided by the recently formed ABN AMRO Clearing & Execution Services business).
Prime brokerage is the integrated provision of a number of specialist services to professional investors and arbitrageurs, principally hedge funds. Services include providing funding, trading and operational support to these clients, in return for financing, brokerage and service fees. Over the last 10 years, the hedge fund industry in the US has grown from USD 20 billion to approximately USD 500 billion under management, and it is also expanding rapidly in Europe.