RBS's Acquisition of ABN AMRO Businesses

RBS’s announcement of 29 May 2007 set out the rationale for its participation in the proposed offer to acquire ABN AMRO. That announcement remains unchanged except in relation to LaSalle.

RBS intends to continue with the acquisition of the Global Wholesale Businesses and International Retail Businesses of ABN AMRO (“the ABN AMRO Businesses”). Instead of acquiring LaSalle, RBS will acquire cash from the sale of LaSalle and, in the absence of LaSalle, the synergies anticipated in North America have been revised.

The consideration for the ABN AMRO Businesses net of the sale of LaSalle will be €16 billion, of which €5 billion will be financed by equity.

RBS believes that this transaction will provide enhanced growth prospects and attractive financial returns. As a result of the transaction, RBS expects to deliver cost savings amounting to €1,237 million (or €1,319 million, including its share of central cost savings) and net revenue benefits amounting to €481 million, by the end of 2010.

On RBS’s forecasts for business growth and transaction benefits, the internal rate of return on the acquisition of the ABN AMRO Businesses will be 15.5% post-tax, well above the Group’s hurdle rate of 12% post-tax. The acquisition is expected to deliver a post-tax return on investment(Return on investment defined as profit after tax plus post-tax transaction benefits over consideration plus post-tax integration costs) of 13.2% in 2010, and to increase Group adjusted earnings per share(Adjusted for purchased intangibles amortisation and integration costs) by 2.0% in 2009 and by 7.0% in 2010.

Sir Fred Goodwin, Group Chief Executive, said:
“The acquisition of the ABN AMRO Businesses remains compelling from a
financial point of view, as evidenced by the fact that it produces essentially the
same earnings enhancement for the Group, despite the smaller size of the
transaction. From a strategic perspective, whilst we would have preferred to
acquire LaSalle as well, the businesses we are acquiring open up many new
markets and growth opportunities, enabling us to significantly accelerate our
strategic development.” -The Royal Bank of Scottland