British bank Barclays's hopes of taking over Dutch rival ABN AMRO won a boost on Tuesday when a court adviser said ABN could sell its U.S. arm without a shareholder vote.
The surprise opinion from Advocate General Vino Timmerman, a law professor, is an indication of how the Supreme Court will rule next month on the disputed $21 billion sale of ABN's Chicago-based bank LaSalle to Bank of America.
Barclays's agreed all-share offer for ABN, worth 63 billion euros ($84.8 billion), is conditional on the LaSalle sale going through. A rival consortium led by Royal Bank of Scotland has offered 71 billion euros for ABN, but this is conditional on it also buying LaSalle.
Both deals would be the biggest bank takeover.
Obviously it's quite a severe blow to the aspirations of Royal Bank, said Alex Potter, bank analyst at Collins Stewart in London.
The Supreme Court has followed the advocate general's opinion in 75-80 percent of cases, several observers estimated.
The Supreme Court is due to rule in mid-July. The banks involved have a week to reply to the latest opinion, which contradicted a ruling by a commercial court in May, which said ABN shareholders should vote on the LaSalle deal.
Dutch shareholder group VEB, which has led opposition to the LaSalle sale, said it would continue to try to block the deal. It says the deal prevents ABN shareholders receiving a higher takeover offer.
Timmerman said in a statement the LaSalle transaction does not need shareholders' approval under the Dutch civil code.
It's not a knockout but it makes the consortium bid as it stands void. They need to rethink their strategy, said Vasco Moreno, analyst at Keefe, Bruyette & Woods.
By 1110 GMT, shares in ABN slipped 0.4 percent to 34.32 euros, as the opinion reduced the chances of a bidding battle, dealers said.
Barclays shares dipped 1.3 percent as investors reacted negatively to its greater chances of success, although there was some relief that it may not need to raise its offer.
As long as the Barclays offer stands where it is, it looks like they've got the support (of shareholders), said Guy de Blonay, fund manager at New Star, who owns shares in all the European banks in the takeover tussle.
Some investors, led by U.S. hedge fund Atticus, have voiced concern in the last two weeks that Barclays could raise its bid.
Shares in RBS added 1 percent and its consortium partners, Santander and Fortis, were little changed.
All the European banks involved said they would study the opinion but would not comment further ahead of the court ruling.
The Supreme Court's decision will put either Barclays or the consortium in pole position to win the acrimonious battle for ABN, but analysts said both sides could return with a revised offer if the ruling goes against them.
If there is confirmation the consortium has two possibilities -- to walk away and say 'we're not desperate for a deal', or secondly they could say economically it still makes sense to pursue ABN excluding LaSalle, and make a new offer, De Blonay said.
The opinion strengthens the hand of BofA, which has said its deal for LaSalle is binding but was considering a compromise with RBS to resolve the dispute, sources have said.
It almost removes the need for them to think about negotiating at the moment. If this gets ratified by the Supreme Court then Bank of America are getting LaSalle full stop, Collins Stewart's Potter said.
If the Supreme Court agrees the LaSalle sale does not need a shareholder vote, it can make a final judgment or, more typically, will send the case back to the commercial court.
(additional reporting by Andrew Hurst in Zurich)