Citigroup rules itself out of ABN bid by joining Barclays team

Barclays' hopes of securing a merger with its Dutch rival ABN Amro took a huge leap forward yesterday after Citigroup in effect ruled itself out of a counter-bid by joining the British bank's team of advisers.

Citi - along with Royal Bank of Scotland and HSBC - has long been seen as one of the most likely counter-bidders for ABN, which is currently in exclusive talks with Barclays.

However, its internal procedures are understood to bar it from becoming involved in a deal where it is acting as adviser to one of the parties.

While this rule has been repeatedly broken by other investment banks, a volte face by Citigroup would still be hugely embarrassing and would reflect poorly on its chief executive Chuck Prince, who has made strenuous efforts to clean up the bank's tarnished image.

In addition to Citi, Barclays has also retained Lazard and Deutsche Bank as advisers and Credit Suisse and JP Morgan Cazenove as brokers. ABN is advised by Morgan Stanley, Lehman Brothers, UBS and Rothschild's.

Arthur Martinez, the chairman of ABN, said yesterday in a letter to shareholders that he was "excited" about the potential of a deal with Barclays. It echoes similar words by Barclays' president Bob Diamond on Tuesday.

In the letter, Mr Martinez also said shareholders would be able to vote on five motions put forward by the rebel shareholder TCI but attacked the hedge fund for focusing on "mere short-term cash generation".

The motions include demands that the bank break up the group, return capital to shareholders, investigate a sale or merger of the company, report back to shareholders within six months and commit to no acquisitions for at least six months.

Mr Martinez was given a quick boost when the shareholder Delta Lloyd Groep said it would probably vote against the break-up.

Of TCI's motions, Mr Martinez said: "We do not believe that the interests of our shareholders would be best served by the mere short-term cash generation actions that TCI has put forward for consideration at our upcoming general meeting."

Earlier this week, TCI - run by Southampton University graduate Christopher Hohn - sought to raise the pressure on ABN, saying it had increased its stake from 1 per cent to 2 per cent. The hedge fund also threatened legal action if ABN refused to talk to potential partners other than Barclays. Currently the talks with Barclays are on an exclusive basis.

ABN repeated that there was "no certainty" of a deal with Barclays and insisted it could prosper on its own.

source:www.news.independent.co.uk