Royal Bank May Make $41.7-Billion Hostile Bid for NatWest

Royal Bank of Scotland moved Sunday to prepare a $41.7-billion hostile takeover bid for National Westminster Bank after the English bank rejected a friendly approach Saturday.

Newspapers reported and sources confirmed that Royal Bank had approached NatWest with a bid worth $41.7 billion. Royal Bank, which believes it can achieve hefty cost savings by merging the British banking networks, would launch the hostile bid today, sources close to the process told Reuters.

The offer is expected to beat the hostile bid for London-based NatWest already on the table from its Edinburgh, Scotland-based rival, Bank of Scotland.

Investors expect Royal Bank’s bid to be the winner, as it has potentially greater cost savings to offer than Bank of Scotland and is likely to have a higher cash element in its bid, due to the backing of its 9.6% shareholder, Spanish bank Banco Santander Central Hispano.

An industry source in London told Reuters on Sunday that Banco Santander was “obviously very supportive” and provided some of the cash Edinburgh-based Royal Bank needed for the bid.

Royal Bank will report its annual results today instead of Thursday, the source added.

Royal Bank has 600 branches, of which 308 overlap with NatWest’s network in England. Bank of Scotland has 30 overlapping branches.

NatWest Chairman David Rowland confirmed NatWest had rejected the friendly offer, at a news conference to detail its plans to battle on independently against the Scottish attacks.

If successful, the merger would see a bank with a market capitalization of $19 billion and assets of $130 billion take over a bank with more than twice the market value and $290 billion in assets.