Hedge funds could scupper Fortis
Thursday, July 26, 2007 : PermalinkReuters- Hedge fund shareholders of Belgian-Dutch bank Fortis may yet scupper its ambition to buy parts of Dutch bank ABN AMRO because blocking the bid could boost the price of Fortis stock, fund managers said.
Fortis has joined with Royal Bank of Scotland and Spain’s Santander to bid for ABN but to fund the deal it needs a rights issue of 13 billion euros (8.7 billion pounds), or one third of its market capitalisation.
Shares in Fortis have suffered as a result because capital increases dilute stock values. It faces a shareholder meeting on August 6 where it will seek approval for its ABN plans, in what would be the world’s largest-ever bank takeover.
Fortis will be banking on shareholders who are willing to keep their holdings and wait for the deal to bring value that compensates for the effect of the capital increase.
“The free float of Fortis is very high. If there are too many short-term investors then they will vote no because of the capital raising,” said Stefan Vyverman, who manages private client portfolios at Commerzbank International.