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  • Peter Smith

MONDAY 31st JANUARY - the Final Bids?



A big day – because of takeover rules, this is the last chance for the bidders to make new offers. At 8.30 am RBS announces an increased bid. Basically, they have added £1 in cash to the previous proposal. There is also the option to take 0.92 of an RBS share and £4.50 in cash rather than 0.968 of a share and £4.00. Along with the "mix and match" option, where you can vary these proportions, and the "loan note" option, offering a future pay out rather than the cash now (this helps some investors' tax positions apparently), you need three PhD's and a good spreadsheet to work out what to do!


The revised offer is all in all pretty much what was expected, in fact probably a little less if anything, and immediate reaction from the commentators is muted. It doesn't look like the "knock out blow" some were hoping for, valuing NatWest at around £14.20 per share based on the current RBS share price.


I call HR; thankfully, the bonus pool amount is pure bonus and does not have to include salary increase. Perhaps I won't have rioting in the streets of Kings Cross, not that anyone would probably notice. Meet Mike Newens to discuss the scope of Redgrave and how it affects his Property function. He is rightly wary of breaking up his well-integrated systems to accommodate our new e-procurement processes.


I am prepared to concede some ground on this, but I insist that Redgrave must get involved in the actual core purchasing stuff his people do; contracts for catering, utilities, architects and so on. I can’t go and sell our services to 3rd parties without having capability in those sorts of areas. We have some way to go before we get agreement here. Mike is highly competent but defends his territory.


In order to work undisturbed on the bonus allocation, I leave early. It is difficult to get stuck into the complex spreadsheets with phones going and people wandering into my office. The actual allocation is not as bad as I first feared. The amount we have been awarded means we are down in percentage terms on last year, but most people will get close to the actual amount they received last year. Some who have performed better will actually see an increase, but there will be some reductions as well.


At 7.30 p.m. BoS increases its bid again. There is nothing on the Channel 4 business teletext, which I usually prefer, but BBC2 text reports it - but with little detail. It looks like they have moved back ahead of RBS again. I am hoping for some comment, but the television news programmes are full of the Harold Shipman verdict. He has been found guilty of some horrendous number of murders. I suppose we can't blame the media for losing interest in NW when we have the biggest mass murderer in history (possibly) being convicted.


For each NatWest share, BoS are now offering 1.75 shares, £2.46 in cash with a loan note alternative, a "Bank of Scotland Special Stock Unit" or a £1.10 cash alternative, a free set of tumblers, a nice snack and sandwich toaster and a half-price dry cleaning voucher. OK, I made the last three up, but this is getting horribly complicated. Trying to compare the bids is very tricky, much of it is driven by investors' desire to maximise the cash element in the bid. But the share element is still three quarters of the total, and that is susceptible to the volatility of the price movements. The current value is around £15 per NatWest share.


I am still half expecting a last-minute response from RBS. I have a vision of a dark and imposing Boardroom deep in the medieval quarter of Edinburgh - Saddle those horses, clansmen! Load those sporrans! Take the Camerons' last bag of gold from behind their peat store! Hold the front page! Get the Chief Executive of Standard Life on the phone and tell him his daughter will be mine if he doesn't ride with us tomorrow! But no; it looks like that is it. We are now in the hands of our wonderful, esteemed, intelligent investors.


Shares are down in RBS and BoS, so as fast as they apparently raise their bids, the value drops as most of the payment is still in shares not cash. Then NatWest shares drop in response. BoS have raised their bid 3 times, yet we are still looking at a value of under £14 per share possibly being enough to win NatWest. NW shares were above this level last only last Spring, since when performance and prospects have certainly not worsened.


But the whole sector is badly out of favour, not helped by investors piling into Vodafone, who look like winning their acquisition battle to swallow up Mannesman. Internet stuff is looking increasingly flaky, and there have been announcements of cutbacks at Amazon and Boo, but that hasn't yet translated yet into a revival for bank shares.

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