ABN Amro Proceeds With IPO to Pay Back Dutch State Bailout

  • Offer may take place in the fourth quarter of this year
  • Dutch state to retain a majority of company after IPO

ABN Amro Group NV is returning to the public markets in what may be European banking’s largest initial stock sale since 2011 after reorganizing and shrinking. Investors will be betting that the lender’s dividends will be safe.

The Dutch government, which took over ABN Amro in a bailout seven years ago, plans to sell shares in Amsterdam as soon as the fourth quarter, according to a statement Tuesday. Proceeds will go to the state, which is seeking recover some of the 22 billion euros ($24 billion) it spent on the rescue.

ABN Amro is seeking to lure private investors after having the most profitable quarter since it was reinvented in 2010. The bank said last month that it plans to pay out 50 percent of profit in dividends in 2017, up from 40 percent this year.

"ABN will be attractive to investors who’re looking for a safe dividend,” said Corne van Zeijl, who manages 1 billion euros on behalf of Actiam NV. “There’s not a lot of growth at the bank. If ABN can position itself like Scandinavian banks, boring with plenty of dividend, things will work out for them.”

Payout Pressure

Dividends at Europe’s publicly traded banks are under pressure as higher capital requirements take up cash that could have been paid out to shareholders. Record fines against some banks and increased competition from U.S. lenders are also putting pressure on earnings.

The government has said it may sell as much as 30 percent of ABN Amro this year and estimated that it may be valued at about 15 billion euros. In that event, an offering of 20 percent would raise about 3 billion euros, making it the biggest banking IPO since Spain’s Bankia SA listed in 2011.

"The state has been a pleasant shareholder,” Chief Executive Officer Gerrit Zalm said at a press conference in Amsterdam on Tuesday. "A remaining obstacle for the IPO could be any adverse stock market developments.”

National Icon

The fate of ABN Amro, a national icon, has held the attention of the Dutch for much of the past decade. It came to exist in its current form after the government acquired the Dutch banking and insurance units of Fortis Bank.

The Belgian lender had joined a 72 billion-euro takeover of ABN Amro with Royal Bank of Scotland Group Plc and Banco Santander SA in 2007. The largest financial-services takeover ever turned sour during the credit crunch a year later, leading to the loss of thousands of jobs. The bank was reorganized in July 2010, shrinking to a fraction of its former size and focusing on its home market.

"ABN doesn’t have a lot of growth aspirations anymore,” said Jos Versteeg, an analyst at Theodoor Gilissen Bankiers NV. "It used to be a bank that wanted to play with the big boys. The bank’s stripped down version and local focus should be able attract investors across the board.”

Past Delay

The Dutch state will retain a majority stake in ABN Amro after the IPO, although it plans to completely exit the company. Finance Minister Jeroen Dijsselbloem delayed a decision on an IPO in March when a 100,000-euro salary increase for six ABN Amro board members prompted the resignation of a supervisory board member.

An internal inquiry in Dubai showed ABN Amro staff failed to comply with company guidelines, prompting some people to leave the company. The Dutch central bank and the Dubai Financial Services Authority have also been investigating the alleged violations.

"We have no signals that U.S. regulators are looking at the Dubai case,” said Zalm at the press conference.

Morgan Stanley, Deutsche Bank AG and ABN Amro are managing the IPO, along with Bank of America Corp., Barclays Plc, Citigroup Inc., JPMorgan Chase & Co., ING Groep NV and Rabobank. The shares will trade on Euronext Amsterdam.

The cost of the IPO is estimated at about 9.5 million euros, including banking fees and legal advice, Dijsselbloem said in a letter to the Dutch parliament on Tuesday. The state will seek feedback from investors in the coming weeks to help decide a price range as well as the size of the first part of the offering, he added.

The Dutch Parliament and the European Central Bank provided declarations of no objection for the IPO, according to the statement. The shares will be held by a foundation known as a STAK that will issue depositary receipts to the investors in the IPO. The foundation will be able to take over the voting rights of ABN Amro shareholders if the bank attracts unwanted takeover bids.

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