THEY obviously don’t like it too much down in London, but Scotland’s two major clearing banks are well-run and successful. And when their executives fly down to London to pursue new options it ruffles the feathers of those in the high towers of finance.
With merger mania expected to go on throughout next week, investment bankers in the City of London will continue to fall over themselves to present innovative merger proposals to the boards of British clearing banks and former building societies.
“Investment bankers are running around frothing at the mouth, like hucksters, with proposals to merge, demerge, consolidate, sell bits, buy bits, practically everything that you can think of, hanging out of every pocket,” says one senior London-based banker.
Uncomfortably for the banks, there is the familiar round of leak and gossip – often verging on the malicious, with indignant rebuttal the daily fare of the corporate affairs department. But rumours are also pitched by corporate finance professionals eager to gauge how the market might react to a certain deal. It’s a hotbed of intrigue in many cases.
So when Sir George Mathewson, the Royal Bank of Scotland’s chief executive, emerged behind a proposal for an audacious reverse takeover of Barclays Bank, there was no real surprise. And in the absence of any denial from the Royal Bank, banking analysts believe that this proposal is just one of several options that is actively being pursued by the bank.
The deal would have led to a £35 billion mega-merger between the two banks and catapulted Mathewson into the chief executive role at the merged group. Sir Peter Middleton, Barclays’ deputy chairman would have become its chairman.
There are shades of the way in which David Michels arranged for Stakis to be taken over by Ladbroke, before securing himself a larger role.
A meeting to discuss the Royal Bank’s proposals, which had been scheduled for early February, was cancelled at the last minute, just ahead of Barclays’ announcement that it had hired the American Michael O’Neill as its new chief executive.
Having seen its agreed £630 million offer for Birmingham Midshires trumped by the Halifax last year, there can be little doubt that the Royal Bank, the first Scottish company to make £1 billion profit, is keen to set off some fireworks.
“Everyone in the financial services sector is chatting to everyone else at the moment,” admits a St Andrews Square insider. In view of the alleged rebuff by Barclays, David Raye, a banking analyst at HSBC Securities, cannot resist a jibe at the Royal Bank chief executive’s expense.
“The man known in London banking circles as Mr Charisma likes to think he’s God’s gift to banking. But I doubt whether all his peers in London share his very high opinion of himself.”
Allied Irish Banks, the largest company in Ireland, has also been the subject of damaging takeover speculation. In early February, AIB’s share price soared on the back of persistent rumours that it was about to agree a takeover by either Lloyds TSB or Deutsche Bank.
The bank asked the London Stock Exchange to launch an investigation.
“We have asked our brokers in London to speak to the LSE and request that they look into the source of the takeover rumours,” said a spokesman.
AIB’s finance director Gary Kennedy said that the bank’s best defence against a takeover was to maintain its current growth strategy and “make it very expensive and punitive for anyone to actually buy us.” That’s a view shared by the Royal in St Andrew Square and in the Bank of Scotland’s Mound HQ.
Copyrights 1999 SMG Sunday Newspapers Ltd
This article was published in the Sunday Herald on 21 February 1999