Barclays Bank chief executive, John Varley (left), shakes hands with ABN-AMRO's chairman of the board Rijkman Groenink before giving a news conference in Amsterdam yesterday. - Reuters

British bank Barclays Plc has agreed to buy Dutch rival ABN AMRO for about €67 billion (US$91 billion) in shares as it attempts to fight off rivals to clinch the world's biggest bank takeover.

The deal will boost Barclays' exposure to fast growing markets in Brazil and Asia and secures a deal for ABN's management at a one-third premium to its share price before talks began a month ago. However, there remains a strong threat of a counter-offer from a rival group led by Royal Bank of Scotland.

ABN will sell its Chicago-based United States bank LaSalle to Bank of America for US$21 billion in cash, and the deal with Barclays will be conditional on LaSalle's sale, the banks said. ABN Chairman Rijkman Groenink recommended the merger with Barclays as the "best option" for shareholders.

Growth opportunity

The RBS-led consortium, which also includes Spain's Santander and Dutch-Belgian group Fortis, would break up ABN. The consortium had been due to meet Groenink to discuss its plans on Monday afternoon, but postponed, saying they wanted more information on the deal to sell LaSalle.

Barclays said it would offer 3.225 shares for each ABN share, equivalent to €36.25 a share at Friday's closing price, including ABN's final dividend.

It would create the world's fifth biggest bank with a market value of about US$190 billion and 47 million global customers, and would fulfil Barclays' ambition to join the top tier of global banks and reduce its reliance on the mature UK market.

"The appeal ofthis transaction is the substantial growth opportunity it presents," said Barclays CEO John Varley. The deal is widely seen as a test case for larger bank mergers in Europe's consolidating banking and financial sector, and part of a wave of mega-bank mergers that began in the United States several years ago.

"If you're going to compete in the European or international market you must be bigger," Varley said.

Asked if he was willing to pay more in the face of a competing bid, Varley said: "We have put a good price to ABN shareholders." Groenink said ABN's strategy has been "to build, not to break up," but said if a "serious and more compelling" approach was made he would listen to the approach.

The RBS-led group wants to mull its options after studying terms of the LaSalle sale, and has ruled out nothing, including making a hostile bid for ABN or pulling ou said a source familiar with the matter.

JOB CUTS

Barclays and ABN said a merger would result in €3.5 billion of annual savings, largely from cost cuts including 23,600 job reductions or just over 10 per cent of the combined workforce. About half of those positions will move offshore.

Analysts and investors said Barclays' offer may be too low to secure a win or exclude another bidder who could extract greater cost savings, such as the consortium.

"If financial terms are the major determinant of the outcome here then Royal Bank will win," said Simon Maughan, analyst at Blue Oak Capital. "What is pretty clear is that Barclays can't go much higher. They could sweeten it but I don't think they're minded to go much higher than this."