One of the fiercest takeover battles ever in Europe intensified Thursday as Bank of Scotland PLC upped the ante on its bid for National Westminster PLC.
Bank of Scotland's announcement that it was adding $2.06 per share to its offer for Natwest prompted speculation that Royal Bank of Scotland will soon increase its competing bid.
Bank of Scotland's move brings its total offer for Natwest to $23.88 per share, or $40 billion That's $4.4 billion more than Royal's best offer to date.
"The next move is up to Royal Bank of Scotland," said Brown Brothers Harriman analyst Raphael Soifer. "We fully expect Royal Bank of Scotland to make some improvement in its offer."
Final offers are due Jan. 31, and Natwest has until Feb. 14 to accept one bid or the other. If neither Scottish bank gets a majority of shares, Natwest would remain independent.
The increased offer from Bank of Scotland takes the form of a special stock unit consisting of a right to participate in either a special capitalization issue or special cash dividend or combination of both.
Bank of Scotland launched its original bid for Natwest in September, setting off the largest bank takeover battle in Europe on record. The Scottish bank has proposed selling off several Natwest units, including the bank's fund management unit, Gartmore Investment Management, the U.S.-based investment firm Greenwich Natwest, and Ulster Bank in Ireland, to defray costs of the acquisition.
Both Bank of Scotland and Royal Bank say they can dramatically improve profits at Natwest by eliminating inefficient operations and branches and by combining back-office operations.
Natwest has vehemently resisted offers from both banks, and on Thursday its chairman, David Rowland, advised shareholders to reject the revised bid. Mr. Rowland termed the improved offer "nothing more than tactical maneuvering by a bank that's struggling to achieve credibility for an inadequate offer."
However, Bank of Scotland chief executive Peter Burt suggested that his bank might yet increase its offer if confronted with a new and higher bid from Royal Bank.
"We're not saying this is a final offer," Mr. Burt told reporters on Thursday.