THE New York hedge fund Atticus Capital will this week warn John Varley, chief executive of Barclays, that it will be able to block its attempt to buy ABN Amro if the bank does not willingly drop the bid itself.

David Slager of Atticus, which last week increased its stake in Barclays to more than $1 billion (£506m), told The Sunday Times: “We are canvassing shareholders at the moment and we cannot find any that support this deal. Atticus by itself would not have an impact, but we are confident that shareholders support us in aggregate and the deal will be blocked.”

Slager, who argues that the plans for the world’s biggest bank merger would destroy shareholder value, said he would deliver the same message to Varley on a conference call arranged for Wednesday between Barclays executives in London and Atticus managers in their Park Avenue offices in Man-hattan. Atticus has become well known for warning chief executives to listen to shareholder views or risk losing their jobs. It helped TCI, the London-based hedge fund, to topple Werner Seifert from Deutsche Börse when he refused to drop his bid for the London Stock Exchange.

Slager said: “We are not against the principle of Barclays expanding into different geographies – for instance we would be supportive of a merger of equals or organic growth in a new market – but we cannot support this deal that destroys shareholder value. Our central case is that Barclays should not be using its undervalued paper to buy ABN Amro in a competitive auction.”

Several of Barclays’ top institutional shareholders have separately made it clear to the bank that they have deep concerns about entering into a bidding war and overpaying for ABN.

But Naguib Kheraj, the former Barclays finance director who is now running the bid, said: “We’ve spoken to a lot of shareholders and while there will always be some who express doubts, the vast majority are supportive of the bid.”

Insiders at Barclays argue that Atticus has failed to take into consideration the synergies or the long-term benefits.

The rebellion comes at a critical time as Barclays is looking into whether it could sweeten its €65 billion (£44 billion) all-share bid for ABN should it have to go head to head with a rival offer from a group led by Royal Bank of Scotland.

Both sides are desperately trying to curry shareholder support while waiting for a Dutch court ruling over the future of La Salle, ABN’s American bank, before the process can continue.

Barclays is considering a sweetener that could include adding a cash component to its offer. The bid by the rival cons-ortium, which includes Santander of Spain and Fortis, the Dutch bank, is worth €71 billion, mostly in cash, although it comes with more conditions.

Barclays closed at 749p on Friday.

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