National Westminster Bank Plc, which owns Ulster Bank, will launch a stinging attack on hostile bidder Bank of Scotland next week in a defence document, which could also include the promise of a special dividend pay-out.

The Observer newspaper said yesterday that NatWest, which has until October 28th to deliver its first defence against the take-over offer, will commit itself to paying a special dividend of up to £3 billion sterling ($5 billion) if shareholders reject the £20 billion bid from Bank of Scotland.

A spokesman for NatWest declined to comment.

However, the bank is understood to be considering all defence options, including finding a "white knight" offer and the sale of non-core businesses, such as Ulster Bank, capital markets unit Greenwich NatWest and fund manager Gartmore. Bank of Scotland wants to sell all three.

Returning capital to shareholders is also an option.

The Observer said the defence document would include NatWest plans for cutting 10,000 jobs. Bank of Scotland's offer proposed chopping 23,000 jobs.

Banking analysts expect Nat West to attack the record of Bank of Scotland's management team and question the ability of its chief executive, Mr Peter Burt, to manage a bank with five times as many branches and a more complex business.

Thursday is the deadline for NatWest to defend its case against the Scottish bank's unwanted bid under British take-over rules, being 14 days after Bank of Scotland's offer document was issued.

According to the timetable for hostile bids set by Britain's Take-over Panel, NatWest shareholders must give their final verdict within 60 days of the offer document.

Any rival bidders are expected to show their hands after Nat West's defence document is released.

Fellow Edinburgh-based bank Royal Bank of Scotland is widely tipped to be preparing a counter bid and mortgage bank Abbey National, which recently appointed advisers, is also interested.