HBOS DEAL:LLOYDS TSB said yesterday it expected annual savings of "significantly in excess of £1 billion" from its £12.2 billion takeover of HBOS by 2011, but said it had yet to decide on how many job losses would be involved among the combined bank's 140,000 staff.
The British government confirmed it would use public interest grounds to push the deal through to “ensure the stability of the UK financial system”, but Eric Daniels, Lloyds’ chief executive, said the merger had been struck on commercial terms and was not merely a government-brokered rescue of HBOS.
The two banks had discussed a combination many times over the years, but talks had become serious “in the past several weeks”, Mr Daniels said. He acknowledged that only the current turmoil in financial markets had made a deal possible, saying “it is a unique moment in time”.
Andy Hornby, HBOS chief executive, said the fall in its shares in recent days had been “very concerning”, but customers had been “very restrained”. There had not been a run of people withdrawing money.
He said events of the past year meant the HBOS business model had to be adapted. “Wholesale funding has been incredibly difficult to deliver over the last 12 months,” he said.
HBOS, which is the UK’s largest mortgage lender and also has sizeable loans and investments to property and housebuilding companies, has been hit by falling house prices and property values.
Mr Daniels said that the enlarged bank would be the largest financial services business in the UK, with leading market positions in current accounts, mortgages, savings and loans. He said speculation that 40,000 jobs would go was too high.
A deal generating such large market shares would normally contravene competition limits, but Mr Daniels said that consumers were well protected by UK regulations on market abuse.
The enlarged bank – for which no new name has yet been decided – would be “very consumer-oriented”, offering “innovative” products to first-time buyers of houses, for example. Lloyds also pledged to maintain current levels of new lending – both for mortgages and to small and medium-sized companies – and would expand when market conditions improved.
Under the terms of the deal, Lloyds is offering 0.83 of a new share for each HBOS share, valuing the latter at 232p, based on Lloyds’ closing price on Wednesday night of 279¾p. The enlarged bank would be owned 56 per cent by Lloyds shareholders and 44 per cent by former HBOS investors.
The deal would add 20 per cent to Lloyds’ earnings per share from that year on, Lloyds said.
The HBOS board said it agreed the deal after giving “careful consideration to the current market uncertainties and to their potential impact on HBOS”. It said the price was fair and reasonable.
The enlarged bank would be chaired by Sir Victor Blank, currently chairman of Lloyds, and Mr Daniels would be chief executive. Mr Hornby is staying on to ensure a smooth integration, but no future role has yet been agreed for him. – (Financial Times service)
