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
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
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

Recruitment Genius: Financial Adviser

£20000 - £60000 per annum: Recruitment Genius: Are you recently QCA Level 4 qu...

SThree: Graduate Recruitment Resourcer

£20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...

Guru Careers: Application Support Analyst / 1st Line Support

£25 - 30k: Guru Careers: We are seeking an Application Support Analyst / 1st L...

Guru Careers: .NET Developer / Web Developer

£45K - £55K (DOE) + Benefits: Guru Careers: We are seeking a full stack .NET D...

Day In a Page

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

How a costume drama became a Sunday night staple
Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

Miliband promises no stamp duty for first-time buyers

Labour leader pushes Tories on housing
Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

Aviation history is littered with grand failures

But what went wrong with the SuperJumbo?
Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

Fortress Europe?

Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
Never mind what you're wearing, it's what you're reclining on

Never mind what you're wearing

It's what you're reclining on that matters
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence