Lloyds TSB reveals HBOS takeover details

Lloyds TSB has revealed the terms of its £12.2 billion takeover of HBOS which could result in thousands of job losses.

However, Lloyds has described the deal as a unique opportunity and values HBOS shares at 232p each. HBOS shareholders will receive 0.83 Lloyds shares for every HBOS share.

There is speculation that the deal could lead to 40,000 job losses, a claim that Lloyds has denied.

Since the collapse of Wall Street giant, Lehman Brothers, on Monday, world markets have plummeted on the fears that more financial institutions could fall victim to the global financial crisis.

Yesterday saw the rescue of US insurer, AIG, after the Federal Reserve provided the firm with an $85 billion (£48 billion) rescue package.

With regard to the Lloyds HBOS deal, which is subject to shareholder approval, savings of up to £1 billion a year are expected and Lloyds said the new bank would continue to use HBOS‘ Scottish headquarters.

Lloyds Chairman, Sir Victor Blank, said the deal would create the UK’s leading financial services group.

HBOS owns Bank of Scotland and Halifax, which is the UK’s largest mortgage lender, while Lloyds TSB is the parent company of Cheltenham & Gloucester, the UK’s third biggest lender in terms of outstanding mortgages.

Should the deal proceed, it will not be blocked by competition watchdogs as it was supported by the Government.

Shares in HBOS took a hammering earlier this week amid the Lehman Brothers demise. The bank had its credit rating lowered by Standard & Poor’s, who said the bank’s credit risk was greater than some of its competitors due to high loan-to-value and specialist mortgages making up a sizeable part of its mortgage book.

Lloyds chief executive, Eric Daniels, would head the newly-formed group, however, the future of HBOS chief, Andy Hornby, is unclear.

HBOS chairman, Dennis Stevenson, believes the deal is a great opportunity for the bank and its shareholders, particularly in the current financial climate.

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