There’s something worrying about this report. Fortis Bank, which was part of a three-bank consortium including the Royal Bank of Scotland (RBS) and Spain’s Santander, that bought ABN Amro last year for a whopping $100.2 billion, is now itself struggling to survive, having run up losses so huge that it can’t cope. That in itself isn’t anything remarkable – we’ve just seen some of the bluest of blue chip banks go under. What worries me is the fact that Fortis might sell the ABN Amro Diamond Division shares (which were what fell into Fortis’ lap after for less than its acquisition price of $35 billion.
Selling off assets is a pretty standard way of recouping losses. But even if you’re in a tight corner yourself, the marketplace is usually willing to pay top dollar for any first class assets you might have. In fact, you might get more than you imagined if a bidding war ensues. What this report makes clear is that there aren’t any takers for ABN Amro – at the price it was acquired for. Granted, ABN Amro might have been bought at too high a price. It was acquired after a tough and somewhat bitter bidding war between the RBS-led consortium and Barclays, which had strengthened its war chest with an infusion of capital from China. Still, if any other bank thought that the diamond industry’s “long-term fundamentals are sound” as all the mining companies keep telling us, they might have coughed up the big ticket price planning for future growth.
As thing s stand, the world’s biggest diamond financing bank doesn’t look attractive unless Fortis sells it at a discount. By the way, when the deal went through last year, Fortis was reluctant to take over ABN Amro’s diamond division! So much for sound long-term fundamentals.
