ABN Amro Loses Court Challenge to EU Ban on AcquisitionsAoife White and Maud van Gaal
ABN Amro Group NV lost a court bid to overturn the European Commission’s 2011 ban on acquisitions after a Dutch government bailout.
The European Union’s General Court backed EU regulators in preventing ABN Amro from making large takeovers, saying the bank’s priority should be to repay aid it received from the government ahead of any acquisitions. The ruling can be appealed to the EU’s top court.
Using state aid to finance acquisitions “is in breach of the principle” that government subsidies “must be limited to the strict minimum,” the Luxembourg-based court said today.
ABN Amro is seeking to rebuild after it was nationalized, dismembered and merged with part of another bank. The Dutch government plans to sell the bank in an initial public offering in 2015 should the economy recover and the company succeed in cutting costs and bolstering earnings, Dutch Finance Minister Jeroen Dijsselbloem said last year.
“To me this seems like a non-issue as ABN Amro is preoccupied with preparing for an initial public offering, so its focus is probably more company-specific at the moment anyway,” Lemer Salah, an Amsterdam-based analyst at SNS Securities, said by phone. “Even if they were allowed to do larger takeovers it would probably not be a very smart thing to do when you’re in a trajectory toward a share sale.”
The Netherlands bought Fortis’s Dutch banking and insurance units, including parts of the former ABN Amro Holding NV, in 2008 for about 16.8 billion euros ($23 billion), after the Belgian firm collapsed. The cost of the rescue later swelled to about 30 billion euros. ABN Amro Group’s current value, based on a price of 13 times earnings, would be about 15 billion euros, SNS Securities’s Salah said.
ABN Amro claims that a five-year acquisition ban imposed as a condition of state aid was stricter than those placed on other lenders. EU regulators approved recapitalizations of as much as
5.45 billion euros after ABN Amro agreed to a ban on large takeovers. Other restrictions, including a ban on undercutting competitors for some products and a prohibition on coupon payments, have already ended.
“We’re disappointed with the outcome,” said Jeroen van Maarschalkerweerd, a spokesman for the lender. ABN Amro will study the ruling and consider whether to appeal, he said.
Antoine Colombani, a spokesman for the EU, said regulators welcomed the court’s recognition that it can ban acquisitions to make sure subsidies are kept to the strict minimum.
ABN Amro’s takeover ban hampers its ability to enhance efficiency after the nationalization left it with “dispersed assets which were subscale” outside the Netherlands, the bank’s lawyer told a court hearing in Luxembourg last year. A more tailored ban could allow ABN to make its private bank in Germany and asset-management operations in Brazil more efficient, and enhance the lender’s economic value for the state, he said.
The EU restrictions didn’t stop ABN Amro from agreeing to buy Credit Suisse Group AG’s German private-banking business. The price agreed was below a threshold set by the EU, the bank said in December.
The Netherlands sought to loosen the shackles the European Union placed on rescued Dutch banks to stoke more vibrant competition in the country’s financial industry. Nationalized ABN Amro, once among Europe’s biggest banks, followed ING Groep NV, the largest Dutch financial company, into Europe’s courts to challenge EU bailout terms that they saw as too strict.
ING had a price-leadership ban on mortgages and savings in the Netherlands lifted in 2013 after winning a court challenge forcing the European Commission to re-examine terms of its rescue. The company agreed to establish a new Dutch consumer bank called Nationale-Nederlanden Bank, adding a “competitive force” in the Dutch retail market, the commission said in November.
SNS Reaal NV, the fourth-biggest Dutch lender, was also banned from making acquisitions in December as part of the EU approval of its nationalization last year.
The case is T-319/11, ABN Amro Group NV v. Commission