Barclays (BCS) finally closed the deal to buy ABN Amro (ABN). Together, they will become the fifth largest bank in the world. Sort of like Citigroup (C), but without the bad management. As part of the transaction, ABN Amro will sell its Chicago-based LaSalle Bank unit to Bank of America (BAC).
The deal will allow the banks to cut 3.5 billion euros in combine costs, but that is easier said than done. The execution risk is great.
And, why does the world need another global bank? Especially one where the price for the M&A deal is so high. ABM Amro was already up over 50% in the last two years. This outpaces Barclays, and far outperforms Citigroup. With the premium, the two year performance of ABN gets very close to 100%. That seems like a dangerously high valuation compared to its peers.
And, that means getting the merger to pay-out for shareholders will be all the harder.
Douglas A. McIntyre
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