ABN finally wakes up and smells the moneybags, deciding – after what seemed like an interminable period – that maybe its board shouldn’t back a massively leveraged bid from Barclays at a time when debt markets are foundering and a competing RBS-consortium is offering gobs of cash.

ABN Amro Holding NV Monday said it no longer recommends a takeover bid from Barclays PLC, meaning the British bank and a European consortium will compete to buy ABN without the advantage of a recommendation from ABN's boards.

Until now, ABN Amro had supported the friendly bid from Barclays, effectively opposing a competing bid from a consortium of three banks led by Royal Bank of Scotland PLC and including Dutch-Belgian Fortis NV and Spanish bank Banco Santander SA.

ABN Amro said it had made changes to its merger protocol agreed with Barclays and is now free to discuss the competing offer. A spokesman for ABN Amro cited "a clear gap in valuations" between the two proposed bids. "We've shared with Barclays over the weekend that we were to change the merger protocol, and they have not walked away from the discussions," the spokesman said.

The consortium's offer values ABN at €71.97 billion ($98.17 billion), higher than Barclays's proposed offer of €65.65 billion. A critical next step is the Fortis shareholder vote a week from today on the consortium's bid and Fortis's financing plans, including a €13 billion rights issue. A thumbs down would be a serious setback for the consortium.

Last week, Barclays submitted a new bid that offered more cash after it received financial commitments from China Development Bank and Singapore's Temasek Holdings Pte. Ltd. Barclays made that bid conditional on ABN confirming by today that ABN would keep in place a recommendation provided for Barclays's initial bid. However, Barclays said last week it could extend the date for that condition or waive it.

(Continue reading this story on Wall Street Journal)

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