How did RBS take over Natwest which was three times bigger a decade ago?

iAMaLONDONER

How could RBS afford to take over a rival that was 3 bigger than itself?

JuicyJesus

Its share price had fallen, making it a cheap buy.

Size doesn't matter, it's how much the shares would cost that does.

agrinnall

Ever heard of Wikipedia?

In 1999, the chairman, Lord Alexander of Weedon, announced a merger with Legal & General in a friendly £10.7 billion deal, the first between a bank and an insurance company in UK history.[18] The move received a poor reception in the London financial markets and NatWest's share price fell substantially.[19] Seen as a driver of the ill-advised investment banking expansion, Derek Wanless was forced to resign as chief executive following the appointment of Sir David Rowland (who became executive chairman).[20] Also in 1999, in response to the much reduced NatWest market capitalisation, the much smaller Bank of Scotland made a hostile takeover bid for NatWest. The Bank of Scotland's aim was to break up the NatWest Group and dispose of its non-retail assets. NatWest was forced to abandon its merger, but refused to agree to a takeover by a rival bank.[21] The Royal Bank of Scotland tabled another hostile offer and trumped the Bank of Scotland with a £21 billion bid.[22] The takeover of NatWest in early 2000 was the biggest in UK history. National Westminster Bank, once Britain's most profitable bank, was delisted from the London Stock Exchange and became, with its subsidiaries, component parts of the Royal Bank of Scotland Group.[23] The outcome of this bitter struggle set the tone for a round of consolidation in the financial sector as it prepared for a new age of fierce global competition.[24] The Royal Bank of Scotland Group became the second largest bank in the UK and Europe (after HSBC) and the fifth largest in the world by market capitalisation. According to Forbes Global 2000, it was the then 13th largest company in the world.[25] While NatWest was retained as a distinct brand with its own banking licence, many back office functions were merged with those of the Royal Bank, leading to over 18,000 job losses.

Thrugelmir

Fred the Shred was a blue eyed boy back then. Had the support of institutional investors.

realaledrinker

Read "Making It Happen - Fred Goodwin, RBS and the men who blew up the British economy"by Iain Martin for lots of detail.

System

I think the UK banking sector would be different today if BOS had taken over NatWest and not RBS...

• BOS was better run and more prudent so BOS/NatWest would have been in a better position in 2008.
• Ulster Bank was to be sold off and would have gone bust in 2008.
• Barclays would have merged with ABN AMRO and needed bailing out by the UK and Dutch governments in 2008.
• LloydsTSB would have needed it's own bailout.
• There would have been no HBOS and Halifax would have been taken over by Santander like A&L

Thrugelmir

Heng_Leng wrote: »

[*]BOS was better run and more prudent so BOS/NatWest would have been in a better position in 2008.

Why was BOS itself taken over with an arranged marriage in the space of 48 hours?