I manage to get hold of the RBS "increased offer" document. Again, they have split the content into two separate documents, with one containing all the complex legal detail, and the other which is much more readable and focuses on why their proposal is the best. However, the more complex does contain an interesting and fundamental comment as part of the Chairman's letter.
It is now clear, they say, that the three proposals are quite different. RBS "aim to create a pre-eminent force in European banking", with excellent growth prospects. NatWest will make disposals to maximise cash distribution, leaving core businesses "which have grown only very slowly over recent years."
BoS proposals are a hybrid; they would lead to a bigger bank than NatWest, but it would be limited largely to the UK and focused on lending. Clearly RBS are playing the diversity card strongly; will this work given that NatWest has been criticised for getting into too many things that took attention away from core business?
The other document uses the heading, "Best Vision, Best Benefits, Lowest Risk", and talks about the new company as "RBSNatWest". The vision element talks about the strength of the combined businesses, the range of areas in which the new company will have market-leading positions, and the non-UK stuff such as Citizens and Ulster.
The company will have an enviable spread of diverse activities. There is also a section that says that RBS will aspire to be "best for shareholders, best for customers and best for staff. "Management positions in RBSNatWest will be offered to the best people, whether from RBS or from NatWest." That looks like a quote to cut out and keep. It does beg a few questions though, such as location - is that "the best" as long as you will move to Edinburgh?
In terms of the benefits there is a re-statement of the expected synergies, efficiency and de-duplication cost savings that add up to the grand total of£1,180 million a year. But this document has more focus than before on growth, comparing the RBS income growth of 16% annually over the last five years with our growth of only 4%. Indeed, NatWest Retail growth over the last two years was only 1.6% per annum; way behind the market and RBS.
They also talk about the opportunities for additional growth from bancassurance, Europe and e-commerce, and compare their proposition with both stand-alone NatWest and the BoS option. BoS have, they say, limited understanding of a number of our businesses; a point which we have also made of course. RBS also question the logic ofNatWest disposing of Ulster.
RBS also claims to be the only one of the three to have successfully completed a major organisational transformation programme. My response to that, based on what I've seen of MOTPs (as we trendy managers like to call them), is "so what?" But they claim this helped them improve their efficiency, while NatWest has failed to reduce our high cost: income ratio. Despite RTP, our latest defence document still "lacks a clear indication of its approach to doing so."
The RBS bid, they claim, is low risk. They identified before the bid a number of key factors that had led to previous mergers failing to deliver the benefits; factors such as impact on personnel and technology integration. They have thought through the issues and are confident of avoiding the pitfalls. Their technology platform is scaleable, and there would be little customer-facing disruption or change, so income loss should not be an issue. In this section, RBS have their strongest attacks on BoS, talking about the BoS cost savings as looking "challenging", questioning the unclear technology plans, and saying that the whole BoS proposal is against their strategy of growth outside Scotland through non-branch distribution. Meanwhile, RBS has put forward a consistent vision and strategy for growth and efficiency.
This looks like a good document to me; quite hard hitting, but making a lot of good, logical points. There are many opportunities that an RBS/NW link up could exploit. I still have some doubts about the savings estimates, which look high, and the big uncertainty is whether the RBS senior management is up to the job of taking on an organisation nearly three times their size. Whatever they say, I don't believe there will be many NW senior people left within a year if RBS do win, so it would be a real test for Goodwin, Mathewson and friends. But despite the volatility of their share price, I think my money at the moment is on RBS.
The press is less good for us today. A couple of the analysts, in the minority in that they are allowed to make comment, have come out in favour of RBS. Standard Life, who own 3% of the shares, say they will support one of the bidders rather than NW, but they haven't decided which one. "We do not think the bank should remain independent," says David Erskine, their investment director. Thanks, David.
Of course, one of the ironies of our modem financial world is that most of us own a bit of every company through various investment vehicles. I have both a mortgage endowment policy and an AVC policy with Standard Life. Hence they are representing my interest as an investor by saying they will sell the company I work for, which will probably mean I lose my job. Complicated world!
Anyway, Standard's declaration is a major blow, as they are amongst the very largest shareholders, and are also very well respected. Some of the smaller institutional investors may take their lead from them. Standard are also of course part of the Scottish financial mafia; is Nationalism going to play a part in our fate? But it is not just the Scots turning against us. Salomon Smith Barney say it is a close call but they favour Royal; Flemings and Paribas prefer Bank of Scotland. They are all clear that we should lose our independence.
The FT also reports a view that if there were a split decision, with neither getting over 50% but only a minority supporting NatWest, then we would have to make a choice. After some optimism over the last few weeks, this feels to me like the beginning of the end. I think the defence has been pretty impressive over the last few weeks, but perhaps we have impressed the journalists more than the analysts and fund managers.
Another Redgrave steering group meeting. Mike Newens wants the contract to contain more detail in terms of how we will handle the third party opportunities. This is not agreed by Bernard and Jim, who re-confirm that the primary objective is to deliver NW internal benefit. I'm worried that Mike is taking over the process. He is such a strong personality and can border on the uncontrollable. And here he may have his own agenda - or at least his own views on how Redgrave should be done. Bernard is clearly not engaged at the meeting and afterwards makes a comment about how I might have yet another new boss soon if we lose. Actually, I suspect he might be going whatever happens.
I suppose Redgrave might continue even if we are taken over, but it is hard to get really excited about some of this now. There is some good news, in that Bernard approves my staff bonus proposals. We are going to issue letters to staff before next Friday so there is a contractual commitment that the Scots can't overturn if we lose. That shows the deep, caring nature of our Board, thinking about the welfare of their troops. Coincidentally, this will also protect their own positions, although I am sure that was never in their minds...
My staff are getting a bit edgy about the lack of news in terms of what Redgrave might mean to them. Last week I suggested they should elect a staff representative to get involved in the discussions. This has proved to be wonderful displacement activity, as they have spent all week with e-mails flying around trying to decide (unsuccessfully so far) who that should be. I actually intervene again and suggest a small team just to try and reach a solution and stop them wasting their time.
The official HR line is that HR themselves, or UNIFI, the union, can act in the staff interest, but my team are intelligent, commercial, cynical people who know this is nonsense. HR will of course represent (quite rightly) NW's interest, and only a handful of staff are in the union. And I 'm damn sure my lot are better and more experienced negotiators than anyone the union could field!
It doesn't help that a cock-up on a recent outsource has come to light. A few months into the new contract, the supplier wants to do some planned redundancies, and no one will fund the cost of the early retirement deal. The supplier says NW agreed to pay it, NW say it wasn’t in the contract. We are slightly culpable in purchasing, although we weren’t heavily involved, but I think generally NatWest is in danger of behaving badly here. I mention it to Bernard who agrees that, if things are as they appear, we have to sort it out properly for moral and reputational reasons. But despite his reassurance the whole episode doesn't give me much confidence that we will be "looked after" by NW if Redgrave does go ahead.
We publish another Exchange announcement, criticising some analysis RBS have put out concerning the financial value of their bid. This hinges on how future dividends are accounted for, and the worth of the RBS "Additional Value Shares" which they will issue. These are not equivalent to cash, and if they were issued would probably reduce the value of the normal RBS shares. We also have yet another attack on the likelihood of achieving merger benefits.