The bank said it will sell institutional fund management arm Gartmore, capital market unit Greenwich NatWest, Ulster Bank and its venture capital arm NatWest Equity Partners.

NatWest said Bank of Scotland's offer "significantly undervalues" the bank and urged shareholders to reject it. Bank of Scotland's offer for NatWest is below NatWest's market capitalization.

NatWest said it will return funds from the disposals and other surplus cash to shareholders, concentrating on its retail, business and private banking customers.

NatWest said that through these divestments and other organisational changes it will reduce the number of its business units to five from 13 and "de-layer management in order to speed decision-making."

Bank of Scotland, when it made its hostile bid for NatWest on September 24, also said it would divest Gartmore, Greenwich and Ulster Bank. NatWest said it will cut its retail bank headcount by 10,000 by the end of 2001.

NatWest also criticized Bank of Scotland's claim that it can achieve 1.015 billion pounds in cost savings from a merger of the two banks. The 505 million pounds of cost savings Bank of Scotland has claimed to be able to make from information-technology expenses and merging head offices is "unrealistic," NatWest said.

NatWest said it will step up a restructuring plan already in place. Its new management team will "accelerate cost reduction and transformation in the retail bank and extend NatWest's pre-eminence in business banking, capitalise on the value of its private banking business and build on its world class cards business," the bank said.

The bank said it will set a target of achieving, within three years, a return on equity that is in the top quartile of its relevant peer group. "Bank of Scotland is attempting to hijack cost savings that belong to NatWest shareholders and is claiming unrealistic merger benefits," said chairman and chief executive David Rowland. "I urge NatWest shareholders to reject the offer which is ill-conceived and significantly undervalues NatWest.

Salomon Smith Barney earlier this month put a sales value on Greenwich NatWest of 1.05 billion pounds, on Gartmore of 550 million pounds and on Ulster Bank of 1.75 billion pounds.

NatWest earlier this month replaced Chief Executive Derek Wanless with Rowland. The bank also hired former Lloyd's of London trouble-shooter Ron Sandler as chief operating officer.

(The Wall Street Journal)