Barclays to buy ABN Amro for $91 billion

The new group will be based in Amsterdam — seen as a negotiating concession to the Dutch — and Varley said he would base himself in the Dutch capital. But the group said it would remain a British "tax resident."

Dutch Finance Minister Wouter Bos, who must approve the deal, said the merger "would fit in the consolidation that is expected to take place within the European banking sector."

The group said it expected to see $4.8 billion in annual cost savings by 2010. Some 12,800 jobs will be trimmed from the combined work force of 217,000, and 10,800 others would migrate to cheaper offshore locations, the banks said.

Varley said Barclays' return on investment would be 13 percent by 2010, which he said "represents a very attractive opportunity for our shareholders."

Both banks said they would recommend the deal to their shareholders, and ABN Amro was due to hold a shareholder meeting this week. The merger was expected to be completed during the fourth quarter of this year, the banks said.

Varley said shareholders faced a stark choice: To either deconstruct ABN by opting for the competing consortium's bid, or to form one of the world's largest banks by accepting Barclays takeover.

Executives refused to speculate on what would happen if the consortium offered a higher bid.

The Children's Investment Fund, a hedge fund that owns a 2 percent stake in ABN and which had pushed for the bank's breakup to improve shareholder earnings, said it was studying the proposed deal.

Varley said the combined power of ABN Amro and Barclays would provide a solid platform for continued expansion.

"This is the start, not the end. We are assembling a group uniquely qualified to compete for business all around the world," he said. He singled out Asia as one area for growth.

Alongside proposed chief executive Varley, Bob Diamond — head of investment banking at Barclays — will be president. The new board will initially consist of 10 members from Barclays and nine members from ABN Amro. Arthur Martinez, chairman of ABN Amro's supervisory board, will be nominated as chairman.

Rijkman Groenink, ABN Amro's CEO for the last seven years, said he would not accept an executive role. Groenink presided over the bank during a period when major shareholders criticized the performance of the bank's shares. Groenink said he would move to a non-executive directorship position.

The deal must be approved by financial regulators, but the banks have been consulting with the regulators during the negotiating process.

For 2006, ABN's net profit rose 7.7 percent to $6.42 billion. Barclays posted an annual net profit of $9.14 billion, a rise of a third from 2005.

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