Bank of Scotland's 254-page offer was seen as significant more because it sets a two-week deadline during which NatWest must outline how it plans to defend itself against the bid. Some market watchers also believe that rival bids could emerge for NatWest once the two banks have presented their cases to the market. Royal Bank of Scotland Plc is considered most likely to jump into the fray, having appointed advisers Merrill Lynch and Goldman Sachs to examine the situation.

"This sets the clock ticking and gives us something concrete to deal with," said Colin Hector, an analyst at Lehman Brothers in London.

In its offer package, sent to 325,000 NatWest share- and option-holders, Bank of Scotland drew attention again to NatWest's high costs and failure to deliver on promised improvements in recent years. In contrast, the Scottish bank promised to "unlock substantial value" if its bid is successful by selling noncore assets, focusing on their combined UK retail banking operations and slashing more than one billion pounds a year in costs. In an aside, Bank of Scotland estimated the cost of making its bid at 187.5 million pounds, mainly comprising taxes and fees to advisers.

NatWest, meanwhile, said in a statement that Bank of Scotland's arguments are "unconvincing." The bank dismissed its chief executive Derek Wanless last week and named existing chairman Sir David Rowland as a temporary replacement. In a move aimed at boosting its credibility before issuing its defense, NatWest also appointed Ron Sandler, a corporate problem solver best known for his role in restructuring the Lloyd's of London insurance market, as chief operating officer.

"New leadership, a great business and total commitment to customer service and shareholder value will deliver far more to our shareholders than this offer," Sir David said in his statement Thursday. "The value inherent in NatWest belongs 100 per cent to our shareholders."

The latest developments, while not providing much new information, mark the first formal step in what could be a messy and drawn-out takeover battle, analysts say. Already preparations are under way for a public relations offensive from both sides aimed at winning the backing of major shareholders. Bank of Scotland has hired one PR firm and three advisers, compared with NatWest's two public relation firms, two advisers and one broker. While takeover rules prohibit the kind of colorful advertising campaigns seen in France's recent three-way banking battle, the two British banks are likely to present their cases in a sober way through newspaper ads.