NETHERLANDS - The president of the Dutch Central Bank (DNB) Nout Wellink has voiced support for ABN Amro, after demands in a letter from the hedge fund TCI for it to break up.
"TCI's action is a bridge too far. It's letter to ABN breaths an atmosphere of: ‘you sort out what you want to sell, but send us the money'," Wellink was quoted as saying by daily NRC Handelsblad. DNB's main responsibility is to maintain financial stability.
"This can have repercussions far beyond our national borders. Thatis why it is of utmost importance that we follow this scrupulously," Wellink reportedly commented.
DNB's approval is required if any party wants to buy a stake of over 10% in ABN Amro.
In addition, the Dutch parliament will organise a hearing on private equity and activist hedge funds. The meeting has been requested by the Socialist Party (SP), which wants to limit shareholders' power.
"Aggressive shareholders only focus on a quick profit, and endanger companies in the long term," SP parliamentarian Ewout Irrgang said. His initiative has already raised broad support within parliament.
The Dutch Investors' Association (VEB) has lodged a complaint with the DNB's supervisory board against Wellink's statements. In the VEB's opinion, the DNB should stick to its supervisory task, and refrain from publicly engaging in the discussion on the performance and strategy of ABN Amro, it said.
Last week TCI demanded ABN Amro put itself up for sale or to break up, in order to increase the value of the company. The hedge fund owns approximately 1% of the bank's shares.
According to ABN Amro's executive chairman Rijkman Groenink, ‘other hedge funds' have acquired stakes in the bank during the past few months. He reiterated that the bank will discuss the issue with its shareholders. Groenink stressed that this is one of the occasions that a chairman needs to show strong leadership.
Not yet known is whether other hedge funds might become involved. The names of Tosca and Algebra are circulating in the market, Het Financieele Dagblad said.
ABP, the €209bn civil service pension fund, declined to comment at this stage. Earlier, it spoke out in favour of industrial conglomerate Stork, which is urged to break up by hedge funds Centaurus and Paulson. "We responded then, because the case had been dragging on for such a long time, and the possible future effects. But of course, we will monitor the developments between ABN Amro and TCI closely," an ABP spokesman said.
Both the €81bn healthcare scheme PGGM, and the €31bn pension fund for metal and mechanical engineering (PMT) indicated it does not currently have an opinion on the issue.