Bank of America sues ABN over halt to sale

BANK of America yesterday slapped a lawsuit for unspecified massive damages on ABN Amro over the legal freeze of its previously agreed deal to buy the Dutch bank's US business, LaSalle.

BoA is seeking an injunction barring LaSalle's sale to any other party, and claims that ABN has been "unjustly enriched" by billions of dollars because of the premium that BoA had agreed to pay in its $21 billion (10.5bn) offer for LaSalle.

The latest development came as Sir Fred Goodwin, chief executive of Royal Bank of Scotland, and his consortium counterparts from Santander and Fortis, were due to meet ABN supervisory board chairman Arthur Martinez in Amsterdam last night to talk about their plans to link bids for LaSalle and ABN.

Earlier in the day, ABN spokesman Jochem van de Laarschot said the bank still recommended the existing 66 billion (45bn) offer from Barclays - which ABN has said would keep the bank intact rather than breaking it up.

He said: "In the meantime, we are working with the consortium in a constructive and collaborative manner."

The RBS-led consortium is expected to offer some 72bn.

The planned sale of LaSalle to BoA, announced just under two weeks ago, was linked with Barclays's agreed bid for the rest of ABN, and was due to complete midnight US-time tomorrow.

However, a Dutch commercial court had ruled on Thursday that the LaSalle sale was to be frozen because it should have gone for ABN shareholder approval.

BoA, in a filing in the US District Court in Manhattan yesterday, said the Dutch ruling meant ABN was "now in breach of its representations that no shareholder vote is required [on LaSalle] and that it had the legal authority to enter the Purchase and Sale agreement".

The American bank said that as a result of these breaches there was now "substantial uncertainty as to whether ABN Amro will comply with its contractual commitment to sell LaSalle to Bank of America".

It said that the Dutch law court, the Enterprise Chamber, had "expressly recognised that Bank of America may have a massive damages claim against ABN Amro".

There have been unconfirmed reports that BoA would seek damages of $220bn against ABN if the LaSalle transaction did not go through. It is also entitled to a $200 million break-free if the deal does not happen.

BoA told the court in its submission that ABN had publicly described the BoA's offer for LaSalle as "a fantastic deal" and a "world class price".

It said it had also agreed to a highly unusual "go shop" provision that allowed ABN to see if a superior offer for LaSalle emerged from another bank. That go-shop period expires at midnight US time tomorrow, and RBS, Fortis and Santander are expected to announce their bid by then.

In its suit, BoA said that the LaSalle sale transaction with BoA "is not contingent on the proposed merger between ABN and Barclays or any other deal.

"ABN Bank is contractually obligated to proceed with the LaSalle transaction whether or not it merges with Barclays or any other party or no party at all."

It added that BoA "stands to suffer billions of dollars in damages by reason of ABN's breaches of representations and warranties".

BoA said its monetary damages included lost profits, financing costs and transaction costs, while ABN had been "unjustly enriched" by securing a higher price from Barclays and potentially even higher price from the consortium because of the premium offered for LaSalle.