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ECB’s Wellink criticises ABN AMRO break-up call

February 25, 2007


AMSTERDAM, Feb 24: European Central Bank Governing Council member Nout Wellink said hedge fund TCI was going too far in calling for a break-up of Dutch bank ABN AMRO, Dutch daily NRC Handelsblad reported on Saturday.

British TCI Fund Management said in a letter to ABN AMRO on Wednesday that it should explore options to merge, sell or spin off some of its assets, or even the whole business, as it is undervalued.

TCI said it owns more than 1 per cent of ABN.

Wellink, also President of the Dutch Central Bank, was quoted as saying to NRC Handelsblad: TCI's letter suggests to say: see what you (ABN) see fit to sell, but send the money to (TCI). To us, that is a bridge too far. A spokesman for the Dutch Central Bank confirmed Wellink's quotes as reported by the newspaper.

ABN is the latest Dutch company to be targeted by an activist investor.

Hedge funds are calling for Stork to break up and focus on aerospace and forced retailer Ahold to put parts of its business up for sale. Media company VNU, the semiconductor business of Philips and the logistics business of TNT were all bought out by private equity funds last year.

The Dutch Central Bank would not allow the financial markets to be upset and would follow ABN's case closely, Wellink said.

Never before has a hedge fund put such big pressure on a large bank. This can have repercussions far beyond our borders, Wellink said, adding that the central bank would enforce an orderly process if a reorganisation of ABN was called for.

TCI asked shareholders to vote on its proposals at a shareholder meeting scheduled for April 26. ABN has said that while TCI met the criteria for floating proposals, ABN had not yet decided whether to put any of them to shareholders.

Several other speculative investors have taken stakes in ABN AMRO comparable to that of TCI, NRC Handelsblad reported ABN AMRO's Chief Executive Rijkman Groenink as saying.

An ABN spokesman confirmed that other investors had taken stakes in the bank but could not say what size. He said ABN's executives were still studying the TCI letter.

Wellink said when hedge funds cooperate and want to exercise voting rights on more than 10 per cent of the share capital, they have to ask permission from the Dutch Central Bank.

ABN is no stranger to acquisition rumours, which have circulated since a wave of mega-bank mergers began about five years ago. An ongoing restructuring, a foray into Italy and the relatively small scale of ABN's US operations have kept many wondering whether the Netherlands' biggest bank might be bought.— Reuters