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AMSTERDAM-After a month of negotiations, London-based Barclays PLC has reached an agreement to buy ABN Amro Holding NV for just over $91 billion. Under the agreement, ABN Amro will sell its Chicago-based LaSalle Bank to Bank of America Corp. for $21 billion in cash.

The merged company, to be called Barclays PLC, will be based here, but remain a British “tax resident.” The combined institution will have 47 million bank customers. The BofA acquisition of LaSalle would give Bank of America a significant presence in the Midwest. It requires the approval of US regulators and is a condition of the Barclays/ABN merger.

That merger also requires the approval of bank regulators along with both companies’ shareholders, but is expected to close by year-end. Arthur Martinez, chairman of ABN Amro’s supervisory board will be chairman; John Varley, the current Barclay’s CEO will be CEO, and Bob Diamond, head of Barclays’ investment banking, will be president.

The deal represents “the largest merger ever in the global financial industry,” Varley said during a webcast interview. It also creates one of the world’s top five banks and the largest institutional asset management firm.

The announcement in a 23-page press release issued this morning, comes after a consortium consisting of Belgium-Dutch-based Fortis NV, Royal Bank of Scotland PLC, and Spain’s Banco Santander Central Hispano SA solicited talks with ABN Ambro. The talks were to take place this afternoon, but were cancelled following the Barclays/ABN Ambro joint announcement.

In a statement noting Barclay’s offer, the consortium said the meeting was planned so the banks “could present their proposals . . . to be considered alongside Barclays’ proposal.” The consortium offer included the retention of LaSalle, and, “in view of ABN Amro’s decision to sell” LaSalle, the statement says, “the banks need to understand the circumstances under which this sale can be terminated. The banks are requesting this information today. Accordingly, the banks do not consider it appropriate to meet with ABN Amro today.”

According to published reports, ABN Amro said it will meet with representatives of the consortium, despite the Barclays’ agreement. Executives declined to speculate on what might happen if the consortium presented a higher bid. Varley said the option would be a splitting up of ABN Amro or the formation of one of the world’s largest banks under the Barclays acquisition.

Under the proposed Barclays offer, shareholders of ABN Amro will get 3.225 shares of Barclays stock for each share of ABN Amro stock. Barclays shareholders will own about 52% of the new company, and ABN Amro shareholders will own 48% of the combined firms.

The offer values ABN Amro shares at about $49.14 USD, which represents a 33% premium over shares of that company on March 16, which was the last trading day before the two companies entered into negotiations. It is a 49% premium over the average share price of ABN Amro stock for the six months prior to the start of negotiations. In early trading on Monday, April 23, following announcement of the proposed merger, ABN Amro shares were trading at $49.79 USD a share.

The companies estimate cost savings of approximately $4.7 billion from pre-tax synergies resulting from the merger by 2010. About 12,800 jobs will be trimmed from the companies’ combined workforce, and about 10,800 more will be outsourced to offshore locations.

“This proposed merger fits well with our strategic objective to provide significant and sustained value for our shareholders,” says Rijkman Groenink, chairman of ABN Amro’s managing board, in a statement. “We believe that merging with Barclays will unite our significant complementary strengths.”

In the same statement, Varley says, “This proposed merger represents a unique opportunity to create a new competitive force in financial services, which will deliver benefits to our customers and clients and generate sustained growth and additional value to our owners. Our combined geographic reach will ensure exposure to both developed and high-growth developing economies.” During the webcast, he cited growth opportunities in South Africa and Asia.

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