Treasury enriched by bid war
Sunday 19 December 1999
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.
- 1 Video of Irish 'professional boxer' fighting Istanbul neighbourhood goes viral in Turkey
- 3 A pint of water every day is the key to losing weight, scientists say
- 4 Russia 'accidentally reveals' number of its soldiers killed in eastern Ukraine
Video of Irish 'professional boxer' fighting Istanbul neighbourhood goes viral in Turkey
Nazi gold train: 'Significant' discovery made in Poland
Russia 'accidentally reveals' number of its soldiers killed in eastern Ukraine
Carol Vorderman reveals she is 'covered in burns' after she fell off her treadmill while running naked
TTIP controversy: The European Commission and Big Tobacco accused of cover-up after heavily redacted documents released
Dresden riots: Protesters in Germany attack refugee buses shouting 'foreigners out'
France train shooting: US soldiers speak of the moment they stopped gunman and 'beat him until he was unconscious'
Labour leadership: Jeremy Corbyn accused of 'deluding' young supporters with 'claptrap'
'Women only' train carriages: Jeremy Corbyn unveils radical move to tackle public harassment
Black holes are a passage to another universe, says Stephen Hawking
Iain Duncan Smith calls for urgent ESA overhaul as part of drive to cut down welfare costs
iJobs Money & Business
£13000 - £25000 per annum: Recruitment Genius: Would you like to be part of a ...
£20000 - £25000 per annum + competitive: SThree: Are you passionate about sale...
£25000 per annum + benefits: Ashdown Group: A large financial services company...
£20400 per annum: Ashdown Group: An established and highly reputable organisat...