Barclays, ABN Amro merger gets market talking; Morgan Stanley prices reverse convertibles

By Sheri Kasprzak

New York, April 23 - Even though it may be too early to tell how the merging of banking giants Barclays Bank plc and ABN Amro Holding NV will impact either bank's structured products desk, some market insiders said they feel the combination is a good thing.

"It's hard to say right now," said one market source based in New York. "I think it's probably a good thing for both of them. In terms of what it means for structured products, I would imagine it means they'll be able to reach a wider customer base. Perhaps it means they'll be combining some proprietary products, which ultimately means selling more."

Another market source, also based out of New York, agreed with this last speculation.

"I would think it would mean they'd expand their structured products offerings," he said. "That's all just speculation because no one knows what the specific impact will be on any of their lines [of business]."

Representatives from neither Barclays nor ABN Amro responded to requests for comment on the merger and its potential impact on their structured products offerings Monday. Market sources at both banks said they could not comment at this time.

Terms of the merger

Shareholders of ABN Amro will receive 3.225 new Barclays shares for every share of ABN Amro and 0.80625 Barclays American depositary shares for every ABN Amro American depositary share. The total value of the transaction will equal €67 billion, or US$91 billion.

The newly merged company will be headquartered in Amsterdam.

Morgan Stanley prices deals

Elsewhere, Morgan Stanley priced two offerings linked to energy companies as oil prices jumped to almost $66 per barrel, continuing a recovery that began Friday morning after a decline earlier last week.

Oil gained $1.78 Monday to close at $65.89 per barrel.

"Oil prices have an impact in that it affects the share price [of energy companies]," said one market source when asked about the likelihood that the deals were priced because of oil prices.

Morgan Stanley priced $4.695 million in 14% reverse convertibles Monday linked to Joy Global Inc. and $2.924 million in reverse convertibles linked to Southwestern Energy Inc.

Both notes have a one-year term. The Joy Global notes have an 80% knock-in price and the Southwestern notes a 75% knock-in price.

Both notes pay par at maturity unless the reference stock drops below the trigger level during the life of the notes and finishes below the initial share price. If that happens, the notes pay a number of shares equal to $1,000 divided by the initial share price.

Barclays prices energy-related deal

In other energy news, Barclays priced $2 million in 10.75% reverse convertibles linked to Peabody Energy Corp.

The six-months have an 80% knock-in level and pay par maturity unless the stock falls below that knock-in level and ends below the initial share price - $46.55.

If that happens, the notes pay a number of shares equal to $1,000 divided by the initial share price.

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