The Royal Bank of Scotland's NatWest takeover was far and away the most successful acquisition in late 20th century Britain.
The great conglomerates, led by James Hanson, Owen Green at BTR and Nigel Rudd at Williams Holdings, did remarkable things by establishing reputations that kept their shares for years more highly rated than target companies. Yet in the end empires were dismantled when the parts became worth more than the whole.
HSBC did handsomely with Midland Bank, but that was down to a great multi-national re-positioning in London before what Prince Charles described as the great Chinese takeaway.
For the rest, 20th century take-overs notoriously benefited brokers and bankers promoting it far more than protagonists.
The Royal Bank and NatWest was something else. The bidder found a target much larger than itself that had lost its reputation, but not its market. Without stripping assets it contrived terms that spread £3 billion around two bodies of shareholders. Above all, there was no fudge, no agreed offer.
The Royal Bank kept it hostile, so at the end of it there were no joint chairmen or cosy succession deals about Buggins' turn to be next chief executive - no argument about who was in charge. Then Sir George Mathewson and Sir Fred Goodwin proceeded to deliver the colossal economies promised, and then some. That done, the City started twitching. The Scottish knights had transformed the sixth largest bank in the UK into a member of the world's top dozen - and very profitably.
They were as ambitious as ever, witness how the US offshoot Citizens was expanding out of its New England base with a judicious series of acquisitions. Surely, nervous City souls pondered, those two would be less than human not to be tempted to attempt a replay their NatWest triumph. And if they did, there must be the risk that, made cocky by getting it so resoundingly right once, they would over-pay next time.
So The Royal Bank's shares languished behind those of banks run by people who had never pulled off any great coup. Sir Fred insisted that he would not cling on to surplus capital for which he could see no attractive use. Nobody could bring themselves to believe him - until yesterday when he combined a 29 per cent dividend increase with a buy-back programme worth a potential £1 billion.
More to the point, Sir Fred says the dividend is not a one-off, but the basis for future pay-outs. That helps with the objection that "special" dividends are a device for subjecting shareholders' capital to income tax.
Sir George reflected on the follies that can happen when a company has more cash than it needs. One wonders, though. How many of these shareholders will actually put this capital to better use than The Royal Bank?
Re-investing it successfully three years into a bull market will not be easy.
