Oct. 8 (Bloomberg) -- Royal Bank of Scotland Group Plc, winner in the six-month takeover battle for ABN Amro Holding NV, now faces the challenge of convincing its shareholders the 71.9 billion-euro ($101 billion) buyout adds value.

``The pressure is on these guys,'' said Colin Morton, a Leeds, England-based fund manager at Rensburg Sheppards, who helps manage about $1.8 billion including Royal Bank stock. ``They've got it, they wanted it, they paid a big price for it. The market will be looking over the next 12 to 18 months for them to deliver on the deal.''

Edinburgh-based Royal Bank has dropped 13 percent in London trading as it led Banco Santander SA and Fortis in the biggest- ever bank takeover. The stock underperformed the FTSE All-Share Index, down 7 percent since May 25, amid skepticism that the bank and its partners are paying too much.

About 86 percent of investors in Amsterdam-based ABN Amro, the biggest Dutch bank, agreed to the takeover by the three banks, they said in a statement today. They will make another announcement by Oct. 12 on whether all conditions of the offer, the biggest in banking, were met.

Led by Royal Bank Chief Executive Officer Fred Goodwin, the group trumped London-based Barclays Plc, which abandoned a competing bid valued at 63.2 billion euros on Oct. 5. The three banks have promised to cut 19,000 jobs and achieve 4.3 billion euros in cost savings and revenue gains by 2010 to make the acquisition pay off.

Losing LaSalle

Goodwin, 49, began to lay the groundwork to buy ABN Amro in 2005 and was initially most interested in ABN Amro's Chicago-based LaSalle unit. To fend off Royal Bank, ABN Amro CEO Rijkman Groenink agreed to sell the LaSalle unit to Bank of America for $21 billion. Goodwin lost the battle in July for LaSalle after the Dutch high court allowed the deal to proceed.

Rather than cede ABN Amro to Barclays, Goodwin's team revised their bid in July to exclude LaSalle and raised the cash component to 93 percent. That made it more valuable to ABN Amro's shareholders than Barclays's mostly stock bid, especially as the U.S. subprime-mortgage crisis triggered a credit crunch the pulled down banking shares.

``The short-term winners are ABN shareholders, who have done very well,'' said Morton of Rensburg Sheppards.

With the greater cash component, Goodwin and his partners have to raise a combined $40 billion in takeover financing amid higher borrowing costs. Royal Bank sold about $7 billion of bonds Sept. 26 to help fund the takeover.

`Tricky Deal'

``It was a tricky deal to start with, and then they didn't get LaSalle and then came the liquidity crisis,'' said Mike Trippitt, an analyst at Oriel Securities Ltd. who has a ``buy'' rating on Royal Bank stock. ``Nobody would have been surprised if they had walked away.''

The group is paying about three times ABN Amro's book value, higher than the multiple of 2.35 that JPMorgan Chase & Co. paid in its $58 billion acquisition of Bank One Corp. in 2004. The acquisition of ABN Amro would be the largest financial-services takeover, exceeding the $69.9 billion combination of Citicorp Inc. and Travelers Group Inc. in 1998.

``The Royal Bank-led offer is a very expensive transaction,'' said Robert Talbut, chief investment officer at Royal London Asset Management, who helps manage about 31 billion pounds ($63 billion). ``The risk-reward doesn't add up.''

Royal Bank shares fell 1.6 percent to 560.5 pence today in London, valuing the bank at 53.2 billion pounds. They are down 16 percent this year. Fortis stock declined 0.9 percent to 22.51 euros in Amsterdam, valuing the company at 49.6 billion euros, and Santander dropped 0.6 percent to 13.86 euros in Madrid, giving the bank a market value of 86.7 billion euros.

Breakup Plan

The breakup plan assigns ABN Amro's Brazilian and Italian units to Banco Santander, Spain's biggest bank. With its slice of the acquisition valued at 19.9 billion euros, Santander will expand into Italy and double its market share in Brazil.

Fortis, the largest Belgian financial-services company, will pay 24 billion euros for the Dutch consumer-banking arm and ABN Amro's asset-management and private banking units to create a ``Benelux leader.''

Royal Bank, Britain's second-biggest bank, is paying 16 billion euros for ABN Amro's Asian and investment-banking operations.

``The three banks have different needs, and each has gotten something that is valuable to them,'' said Nancy Havens, managing member of New York-based hedge fund Havens Advisors LLC, who helps manage about $350 million and tendered her ABN Amro stock. ``The sum of the parts is more valuable than the whole.''

`Substantial Losses'

Analysts including MF Global Securities Ltd. are scaling back expectations that Goodwin can increase earnings by combining the investment banking units of ABN Amro and Royal Bank. UBS AG and Citigroup said earlier this month that their securities units were hurt by higher credit costs. UBS forecast ``substantial losses'' in the fixed-income and currencies division because it holds securities backed by U.S. subprime residential mortgages.

ABN Amro's investment bank, with at least 4,000 employees, said profit excluding some revenue from some global corporate banking divisions almost doubled to about 1.1 billion euros in the first half. Still, it isn't among Europe top 10 investment banks.

ABN advises on mergers and acquisitions, creates securities for stock and fixed-income clients, and makes structured loans.

``Activity in investment banking is weakening and there will be a slowdown which will affect ABN Amro's business,'' said Mamoun Tazi, an analyst at MF Global Securities in London. ``By looking at other investment banks, you can extrapolate that to ABN.''

To contact the reporter on this story: Jon Menon in London at jmenon1@bloomberg.net; Ben Livesey in London blivesey@bloomberg.net

Last Updated: October 8, 2007 14:36 EDT