SIR George Mathewson, chief executive of the Royal Bank of Scotland Group, last week made further steps towards his goal of an opportunistic £28.5 billion ‘reverse takeover’ of Barclays Bank.
Following remarks by Andrew Buxton, Barclays’ chairman, at the English clearer’s annual general meeting on Friday morning, it became apparent that Sir George’s advances have not fallen on deaf ears in Barclays’ Lombard Street headquarters.
In the mega-merger currently under discussion, Sir George would take over the reins at a bank that would become Britain’s third-biggest in market value after Lloyds TSB and HSBC. Sir George, former head of the Scottish Development Agency, is keen to pull off such a merger ahead of his official retirement as CEO in May 2000.
His deputy, the 39-year-old Fred Goodwin would take the role of finance director and deputy chief executive of the enlarged group.
Some industry sources claim, however, that it would be “bizarre” or even “unimaginable” for Goodwin — who joined RBS from Clydesdale Bank amid some acrimony last year — to be anointed heir at what would become one of the UK’s biggest banking jobs.
Barclays spokesman Leigh Bruce said: “Our attitude towards consolidation hasn’t changed in the least. If there is a proposal, something that we believe contributes to shareholder value and which is consistent with our long-term strategy, we would give it serious consideration.”
This suggests that Barclays is still open to merger talks, so long as they are deemed to meet these criteria. The market responded by lifting Barclays’ shares by 54p to 1993p while RBS’s shares remained steady, closing a penny higher at 1411p.
“However it would be daft to make any connection between issues of consolidation and our search for a chief executive,” added Leigh Bruce. At Barclays annual general meeting on Friday, outgoing chairman Andrew Buxton fielded a question from a shareholder about a possible get-together with the Royal Bank of Scotland.
Buxton replied that the bank was “not prepared to talk about speculation.” But he added that the bank’s position has always been to consider shareholders’ interests first.
Michael Lever, banking analyst at HSBC appears broadly supportive of the Royal’s proposal. “A merged group would have total assets of £290bn and net assets of £10bn, the second largest in the banking sector. Cost savings of just under £850m pre-tax might be possible, with nearly 70% of these coming from Barclays. There would also be potential cross-selling opportunities based on complementary product strengths as well as an enhanced customer base and additional distribution channels.”
As talks progress, speculation is mounting that Scottish Widows is also seeking to join the party. Were this to happen, it would make the Scottish and English parts of the equation more balanced.
Mutual status is understood increasingly to be seen as a barrier to growth by Scottish Widows’ ambitious chief executive, Mike Ross, and its finance director Bill Main.
There have been rumours that, despite consistent public denials, from the life insurer’s Port Hamilton glass-and-steel palazzo at 65 Morrison Street that Widows has been secretly plotting to demutualise for some months. The plan could involve offering an appropriate sweetener to the mutual society’s policyholders and accept an immediate agreed takeover bid from Barclays/Royal on becoming a publicly quoted company.
Insiders claim there would be a neat match between Scottish Widows Investment Management’s (SWIM’s) active funds and the index-tracking funds controlled by Barclays Global Investors. The two fund management operations could benefit from cross-badging each other’s products and there would be little conflict of interest.
Hamish Buchan consultant to Bankers’ Trust Alex Brown said: “The Widows has never traditionally been regarded as one of the mutuals that would benefit from doing that, however nothing in finance surprises me anymore.” Meanwhile the Bank of Scotland is keen to dampen speculation that it too has proposed a reverse takeover of Barclays.
Iain Scott, group general manager at Bank of Scotland said that Peter Burt, the bank’s chief executive, would not have been interested. “He does not want to move from North Berwick,” said Scott. Burt a keen golfer, is a member of the Honourable Company of Edinburgh Golfers (which plays at Muirfield near Gullane) and would not wish to be far from his beloved Muirfield fairways.
This article was published under the headline “Sir George in pursuit of a £28.5bn retirement gift“ in the Sunday Herald on 25 April 1999