ABN Amro Holding NV, the Netherlands' biggest bank, has offered $1.254 billionfor NV Bouwfonds Nederlandse Gemeenten, which would raise its share of the Dutch home mortgage market to 25%.

ABN Amro plans to pay for the Netherlands' fifth-largest mortgage lender, which is owned by 479 Dutch municipalities, over five years. The banking company initially would get almost half Bouwfonds' voting rights, gaining full control at the end of 2004.

Dutch home lenders have been swamped as Europe's sixth-largest economy booms, with new mortgages rising 22% in the first half. This has led lenders such as Bouwfonds to limit mortgage applications. ABN Amro said it would use Bouwfonds to expand its business throughout Europe.

"The mortgage business is one of the most profitable businesses of the bank in the Netherlands," said Ton Gietman, an analyst at HSBC Securities Inc., who rates ABN Amro a "buy." Bouwfonds will add about five Dutch cents to its earnings next year and several tens of Dutch cents from 2003 onward, ABN Amro said. No jobs would be lost as a result of the deal.

Under the deal announced last week, ABN Amro would pay $288.56 in cash plus one Bouwfonds preference share for each ordinary share held. The bank is financing the purchase with its own funds.

ABN Amro is the second-biggest mortgage lender in the Netherlands, trailing Rabobank Nederland and ahead of ING Groep NV. Market share of mortgages in the Netherlands is "fluctuating considerably because of the enormous rise in sales," said Rijkman Groenink, a member of ABN Amro's managing board. He said the top three lenders each controls 22% to 24% of the market.

The bank's economists said they expect that local mortgages will grow 12% in 2000 -- after rates of 15% in recent years -- as more Dutch people buy houses.

"The Netherlands is coping with catch-up demand," Mr. Groenink said. The rate of private homeownership is still lower than in surrounding countries, as is the percentage of income spent on housing costs, he said.

In addition to making residential and commercial mortgages, the combined real estate company would establish investment funds and develop property. ABN Amro plans to use Bouwfonds to expand elsewhere in Europe, where the company is "not active" in real estate development, he said.

"We've neglected a very important market segment because we felt we didn't have the expertise," Mr. Groenink said. "That's what Bouwfonds is for."

The mortgage venture may have trouble replicating its success in the Netherlands, Mr. Gietman of HSBC said. Because Bouwfonds is owned by local governments, it is among the first to know when a property will be developed. The company doesn't have the same connections in other countries, he said.

Mr. Groenink said that in countries where the bank is not active, Bouwfonds would work with local institutions.

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