AMSTERDAM, Netherlands -- Pensioenfonds ABP and PGGM have come up short in their bid to take control of 75% of De Nationale Investeringsbank NV, despite use of strong-arm tactics against key minority shareholders.
A PGGM official acknowledges pressuring Fortis Amev NV and ING Groep to tender their shares. Tactics included shrinking a Dutch equity mandate run by Fortis and reducing brokerage business directed to ING.
ABP officials were rumored to have used similar methods, but this could not be confirmed. Press spokesmen at both organizations deny using such tactics.
Nevertheless, Utrecht-based Fortis and Amsterdam-based ING, together with Rotterdam-based ASR Verzekeringsgroep NV, rejected the pension funds' 66 guilder ($31.88) per share offer for NIB, saying the price was too low.
Collectively, the firms hold nearly one-third of NIB's stock: ING has a 20% stake, and Fortis and ASR have about 6% each.
Their refusals to tender have thrown a monkey wrench into the funds' bid. ABP and PGGM officials will announce May 7 whether they will accept the shares that had been tendered, which would give them control of 65.8% of NIB's stock.
It wasn't supposed to happen this way. The planned acquisition of The Hague-based NIB -- a specialized investment bank that is 50.3% owned by the Dutch government -- was designed to turbo charge ABP and PGGM's expertise in financial services, particularly in structured finance and private equity.
Initially announced Christmas Eve, the campaign was led by Jean Frijns, chief investment officer of Heerlen-based ABP, the 292 billion guilder ($141 billion) pension fund for Dutch civil service workers, and Roderick Munsters, his counterpart at Zeist-based PGGM, the 92 billion guilder ($44 billion) fund for health care workers (Pensions & Investments, Jan. 25).
But the offer ran into immediate criticism from financial analysts, who said it was too low. Pension fund officials steadfastly refused to increase their offer, even though NIB stock traded at roughly a 10% premium from the time of the initial announcement until a formal offer was made in early April. Pension officials maintained their offer represented a 30% to 40% premium over NIB's year-end valuation.
But ING executives rejected the 66-guilder offer April 28, noting prices of Western European financial services stocks had risen 20% since the beginning of the year.
"In addition, ING holds the view that the price offered is considerably below the price level which is justified" compared with other European financial services acquisitions, a release said.
Others noted valuations of NIB are slippery because it's tough to value the bank's extensive private-equity holdings, and less than 10% of the bank's stock is freely traded.
Meanwhile, use of behind-the-scenes, strong-arm tactics by the pension funds was widely suspected.
Marinus Keijzer, PGGM's chief economist and strategist, confirmed the suspicions. He said PGGM reduced a 2 billion-plus guilder Dutch equity portfolio managed by Fortis by about 600 million guilders. Fortis' unwillingness to tender the shares was a factor in the decision, he said, although a reallocation to European equities from domestic stocks also was involved.
A Fortis spokesman, confirming the reduction in the PGGM portfolio's size, said the manager is in discussions with PGGM officials over possible restructuring of the remaining portfolio.
"We expect to maintain that contract," he said.
He added: "If we don't maintain the contract, then the coincidence factor is very large."
Mr. Keijzer added PGGM had reduced the number of stock trades it directs to ING and had suspended some possible joint real estate deals.
"We are not engaged in open warfare, but in giving off signals," he said.
He said he was unaware of what ABP officials were doing.
PGGM spokesman Alfred Kool said the Dutch equity portfolio was reduced because of underperformance by Fortis. The timing of the reduction "coincides with the NIB deal," he said.
An ABP spokesman said there has been "no curtailment of activities" with ING and Fortis.
Mr. Keijzer's admission surprised some Dutch investment experts.
"So this is what they mean by corporate governance?" asked one expert, who asked not to be named. ABP and PGGM officials have been at the forefront of the Dutch corporate governance movement in recent years.
Another Dutch pension expert said pressure tactics were business as usual for Dutch investors.
Dutch sources questioned whether the pension funds had a conflict of interests in withholding pension fund business from ING and Fortis, because it was participants' assets they were putting at risk.
If they were unhappy with ING and Fortis' actions, the funds could have sold their stock and not punished the money manager, one expert suggested.
On the other hand, some Dutch financial institutions might fear the pension funds' purchase of NIB would give rise to a new major competitor.
Why would ING or Fortis "be happy with a major competitor coming up?" asked one Dutch pension source.
An ING news release, however, said the NIB acquisition would be a strategic investment for the pension funds and "therefore ING certainly does not want to obstruct the proposed acquisition."
"It's not the idea, it's the price," said spokesman Wieger Sietsma. Spokesmen at Fortis and ASR echoed those sentiments.