Santander to boost UK presence with Alliance & Leicester takeover

Shares in Alliance & Leicester (A&L) have rocketed 47% this morning after it has been revealed that Spanish bank Santander has agreed a deal to buy the former building society in a deal worth £1.3 billion.

Shares in A&L suffered, particularly last year, after many believed it would follow in the footsteps of Northern Rock as out of all the mortgage banks, A&L was seen by analysts as the most similar to Northern Rock.

Earlier this year, it was unveiled that Santander, who took over Abbey National in November 2004, was believed to be in negotiations to buy Alliance & Leicester but talks collapsed over price.

Today, however, it has been divulged that the Spanish bank is offering 317p per A&L share. The deal is expected to be finalised late autumn. The deal will significantly boost Santander’s presence in the UK.

Following the news, shares in other lenders gained, with shares in Bradford and Bingley shares increasing by over 25%.

A&L is recommending the bid to its shareholders and said it represents value, shareholders will have to approve the transaction before it can proceed.

A&L saw its annual profits slump 30% last year due to the turmoil in the credit markets and it has been forced to write-down the value of mortgage-backed investments by almost £400 million.

However, it hasn’t had to call on its shareholders to shore up its balance sheet like other banks.

Santander, which is Spain’s largest bank, is proposing to merge A&L with Abbey, which has led to concerns about job losses.

A&L has a workforce of around 8,000 and is based in Leicester.

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