Fortis, part of the Royal Bank of Scotland-led consortium vying to buy ABN Amro, yesterday unveiled the €13.4 billion deeply discounted rights issue needed to buy its share of the Dutch bank.
The proceeds will partly finance Fortis's €24.7 billion share of the joint bid for ABN Amro. The RBS-led consortium also includes Santander of Spain.
The rights issue, one of the largest ever in Europe, consists of a two-for-three share issue of 896,181,684 new shares at €15 each.
The price represents a near-50 per cent discount to Thursday's closing price of €26.63. Fortis shares rose slightly yesterday to €26.65 - up from €25.3 at the beginning of the week.
Fortis - which is An Post's partner in Post Bank - has long been viewed as the weak link in the consortium, and there had been questions about whether there was sufficient investor appetite for such a large issue.
However, Fortis shareholders voted overwhelmingly in favour of the transaction last month.
People familiar with the situation expect that 95 per cent of the shares will be taken up and that the deal will be earnings accretive by around 3 per cent in 2010.
It is expected to produce a return on investment on a cash basis of 11.1 per cent in 2010.
The rights issue has been fully underwritten by investment banks led by Merrill Lynch. Any shares that have not been taken up by existing shareholders will be sold on a nil-paid basis.
There is some overlap between investors in Fortis and in ABN. ABN shareholders will receive mostly cash for their ABN shares, and as a result, some institutions holding both stocks are thought to be planning to take up their entitlement to Fortis shares.
Earlier this week Royal Bank of Scotland and Santander initiated funding drives to help pay for their share of the bid for ABN Amro.
The move came after the European Commission gave its approval for the Scottish and Spanish banks' involvement in the consortium.
RBS said it planned to issue an unquantified amount of dollar preference shares priced at $25 each that will make up some portion of the €5-€6 billion of preference shares it will issue in total across the US, European and UK markets.
Santander, meanwhile, unveiled plans for up to €7 billion of convertible bonds to be sold to help fund its part of the deal.
