US broker seeks a piece of the action

RIVAL SUITORS

US stockbroker Smith Barney has teamed up with Netherlands bank ABN Amro to prepare a counter-bid for Barings, despite being locked out of the current sales talks between Barings' administrators and Dutch rival Internationale Nederlanden Group.

Smith Barney's interest is given credibility as it is part of Travelers Group, headed by aggressive Wall Street entrepreneur Sandy Weill. In the past five years Mr Weill has added the retail and asset management parts of Shearson to Travelers.

Bankers still expect ING to clinch the deal, however, because it has exclusive access to the administrators and to Barings' books under an arrangement clinched on Thursday.

ING's senior management will try to tie up the acquisition for a notional £1 this weekend, conscious that any delay could prompt staff and client defections from Barings.

The Netherlands' biggest bank, ABN Amro is a keen domestic rival of third- placed ING and wants to buy Barings' fund management and corporate finance operations It would consider selling on the securities side to Smith Barney.

Neither ABN Amro nor. Smith Barney would comment on any link-up. An ABN Amro spokesman said: "We have said all along we are interested in parts of Barings. We follow the matter very closely even though ING have exclusive rights to negotiate."

One banker close to the Barings talks said ING was "in prime position". Bill Harrison of Robert Fleming, who is advising ING on the talks, was described by the banker as a very persuasive individual. He added: "He will make sure ING doesn't waver. They're getting a clearer picture of Barings' liabilities now, but there are aggressive guys waiting in the wings to buy any of the bits that fall off."

Staff morale at Barings has recovered since the nadir on Wednesday when it appeared that the group would be broken up. "Now that ING is prepared to buy the whole thing it's fairly stable over there, so if anyone does want to leave they will wait for a few weeks," one banker said.

"Buying Barings is an enormous bet for ING - it will cost them 10 per cent of the bank. They'll need a rights issue or some form of equity funding," he added.

ING is "a sort of TSB with various developing markets bits tacked on", according to one City analyst. Its chief executive, Aad Jacobs, has declared frequently that he is keen to expand its European base by buying a bank.

The bank is trying to build a private client and corporate finance presence in Asia and Latin America, which analysts think would dovetail well with Barings' emerging markets activities. Barings' £30bn fund management side would give ING a solid stream of high-quality earnings.

The administrators, Ernst & Young, are confident a deal can be arranged with ING despite deepening investigations into Barings by the Bank of England and the Serious Fraud Office. A spokesman for the E&Y team led by Nigel Hamilton drew a comparison with its handling of the administration of crashed financial group British & Commonwealth. "The creditors of the B&C merchant bank got all their money back," the spokesman said.

Bankers expect the fallout from the Barings disaster to accelerate a "Big Bang, part two", with further mergers between London securities houses and merchant banks.

"The Barings debacle will lead to a huge upheaval, the demise of the independent houses," said one source.