Treasury enriched by bid war

A WINNER has already emerged in the hostile takeover bid for NatWest, currently being slugged out between Scotland's two banking giants. It is the Government.

It came as no surprise when Stephen Byers, the Secretary of State for Trade and Industry, ruled last week that Royal Bank of Scotland's offer did not raise competition concerns. Its bid joins that of rival Bank of Scotland on the table, and two contenders means the Treasury's slice of the deal increases to more than pounds 150m.

The colossal cost of the pounds 25bn tug of war - the outcome of which will be known on St Valentine's Day - means that stamp duty and value-added tax on payments made to advisers will be substantial.

The winner will have to pay stamp duty of 0.5 per cent on the total cost of the deal - an automatic pounds 125m into the Government's coffers. Both banks are employing teams of expensive advisers: the cost of these is estimated at pounds 62.5m for Bank of Scotland and pounds 100m for Royal Bank. These payments incur VAT at 17.5 per cent, which has to be paid whether the bidder wins or loses. In the unlikely event that NatWest repels both predators, the Government still claims VAT on the advisers' payments.

Now Royal Bank has been given the nod by Mr Byers, the timetable reverts to zero for both bidders. NatWest has 14 days to respond to the latest bid. Its shareholders will certainly be busy in the new year: they have 60 days to decide if one of the bids is to be successful and will be visited by persuasive representatives from NatWest, Royal Bank and Bank of Scotland to help them make up their minds.

Royal Bank is offering 0.968 of its shares plus pounds 3.50 in loan notes for each NatWest share, valuing the deal at around pounds 23.7bn. Bank of Scotland's bid is pounds 23.7bn plus pounds 2bn from the sale of its assets.

The general feeling in the City is that Royal Bank will win, despite the sharp fall in its share price. But even though Bank of Scotland's share price rose on the news that Royal Bank will be allowed to continue with its bid, this could be bad news.

"It means that the market thinks Bank of Scotland is going to be attacked itself once its bid for NatWest fails," says Justin Urquhart Stewart, business development manager at Barclays Stockbrokers. "Royal Bank should win. It can make a higher offer as it has deeper pockets. If I were NatWest, I would be measuring up for a kilt."

NatWest sold NatWest Equity Partners, its venture capital arm, to the operation's managers on Friday. This is one of a series of disposals that NatWest promised in its defence to the two bids.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Arts and Entertainment
film
Arts and Entertainment
Preening: Johnny Depp in 'Mortdecai'
filmMortdecai becomes actor's fifth consecutive box office bomb
News
peopleWarning - contains a lot of swearing
Travel
travel
Arts and Entertainment
arts + ents
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Client Services Manager - Relationship Management - London

£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

Recruitment Genius: Credit Controller / Customer Service

£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

Guru Careers: In-House / Internal Recruiter

£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Day In a Page

Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project