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The British have a soft spot for heroic failures, so when Barclays boss John Varley abandons his bid for ABN Amro, as he is likely to do any day now, he may well emerge with his reputation enhanced.
He led his troops with a verve and vigour that few outside the bank had seen before, and he left most people impressed. He made an articulate case for the merger, the PR was skilled, and he handled himself well. As a result, he has earned a surprising amount of credit for having a go, even if he did end up outgunned and outmanoeuvred by his tartan rival.
It's a bit like Dunkirk, really. No other nation on earth could possibly regard it as a victory, but in a decade or two people might even think he won if the murmurings that Royal Bank of Scotland has overpaid turn out to prove true. Certainly if you are going to lose a takeover fight, this is a good one too lose.
The value of banks has dropped sharply since the bid was launched. Losing means he did not overpay - indeed he gets a break fee of a few hundred million to cover his costs. He also avoids the massive integration challenge that victory would have brought, at a time when management's attention might need to be focused on sorting out internal problems brought on by the credit crunch.
That said, there is a downside. In trying to secure ABN Amro's consent for the deal, Varley surprised everyone by the amount he was prepared to give away. Out went the London head office; out went the emblematic eagle; out went a lot of the things that made Barclays what it is. Full marks for being unsentimental and clear-sighted? Or half marks for playing fast and loose with the Barclays culture?
The other thing that has changed is the politics. When Marcus Agius was appointed chairman a few months ago, most of the "helpful" advice from outside was that he would have to decide whether he was one of two chairmen, the other unofficially being Varley, or whether Varley was one of two chief executives, the other unofficially being Bob Diamond of Barclays Capital.
In other words, the place was highly political. The confusion seemed even more acute for a period during the saga when Diamond looked to be the person the market most wanted to hear - until that was overtaken by events. The turmoil in the credit markets dented BarCap to an extent that has still not been made clear, and with it Diamond's air of invincibility. Varley now does look unchallenged as the man in charge, sole chief executive to Agius' chairman. So that, too, is progress, albeit as a by-product to the main event.
Finally, in another first for Western capitalism, Barclays has got itself a fully fledged communist as a director. During the bid, it brought in a leading Chinese bank and a Singaporean sovereign investor as significant new shareholders in a move that won grudging admiration across the sector. No one can know how this will pan out, but arguably it could be the most significant long-term consequence of the summer.
In an age when Western banks have been willing to pay billions to buy a stake in banking in China, Barclays managed to get the Chinese to pay billions to get a stake in it. That has to be worth something on the credit line - and the challenge going forward, without-ABN Amro, is to work out how to turn this good beginning into a successful long-term platform for growth. But the question is whether, having shown its appetite for a merger, Barclays will once again be left alone long enough to pursue a strategy of organic growth.
Auction - or no action?
Another phoney war is fast coming to its end with the publication of a formal offer document from Friends Provident for its proposed merger with Resolution. First mooted in early summer, the deal has hung fire ever since. But the sending of the offer document to shareholders is the signal not that it is about to go through, but that the real action is set to begin.
The story is simple enough. The bid from Friends is worth 555p a share. Pearl, a rival to Resolution, has bought a stake in it at a top price of 660p. No one can be quite sure if it will bid, but that is what its body language has indicated since it revealed its stake in July.
Standard Life, which has had prolonged talks with the company before, has also expressed a renewed interest in Resolution, albeit shorn of the same degree of aggression. But how seriously can we take this, given that its share price is so weak that it is in no condition to finance a hostile bid?
Respected though its management now is, it would pay dearly in terms of credibility if there was even a hint it was willing to overpay, and there must be serious doubts about whether it is willing, when it comes down to it, to take that chance.
This is particularly the case because Resolution's share price seems to have discovered how to defy gravity , having stuck for some weeks around 682p. This is a heady 125p above the see-through value of the Friends Provident offer. Intriguingly though, it has not been hedge funds that have been piling on to the Resolution share register, so one wonders who has. They may need asbestos gloves.
The most sensible course of action for Resolution shareholders would be to sell in the market and capture that 682p while it still exists. The chances of a bid from Pearl are obviously quite good but it is unlikely to be much above 660p, given that the market believes the embedded value of Resolution to be only 600p.
The alternative of not selling in the market implies a belief there is going to be a hotly contested auction for Resolution, which will push the price higher, even towards the 700p Resolution chairman Clive Cowdery has been heard to murmur. But for all the reasons just mentioned, such heady action seems unlikely. In fact, auctions can be pretty dull affairs when one party is a Scrooge and the other has no money.
