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Lloyds TSB/HBOS merger details unveiled

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by Kay Mitchell
”Lloyds

The Lloyds TSB/HBOS merger looks set to proceed after both banks have announced plans to raise up to £17 billion through the Government’s rescue scheme.

Today, Lloyds said it plans to raise £4.5 billion from investors with the support of the Government and will offer the Government preference shares worth £1 billion.

Meanwhile, HBOS said it plans to raise £8.5 billion through investors and will offer the Government preference shares worth £3 billion.

As a result, both banks will be part-owned by the Government.

Over the weekend, Lord Peter Mandelson gave regulatory clearance to the merger, stating it is in the public interest.

Under the terms, HBOS shareholders will receive 0.605 shares for each HBOS share they own, revised from the original offer of 0.833.

According to Lloyds, its acquisition of HBOS would save it at least £1.5 billion a year, far more than originally anticipated.

Job losses are inevitable as a result of the merger but Lloyds has not divulged how many jobs will go, but said there was scope for considerable cost savings from merging the branches and back offices of the two institutions.

Both Lloyds TSB and HBOS have confirmed their commitment to the merger deal despite reports of a rival bid.

According to reports over the weekend, an unnamed bidder has emerged and has been in discussions with the Government with regard to acquiring HBOS.

According to Jim Spowart, a Scottish businessman and founder of Intelligent Finance, the interest is genuine and he is reported to be working with a European financial services company, whose identity is yet unknown.

In the meantime, Lloyds TSB said quarter three profits at its wholesale and international division had been hit by a £270 million write-down on assets related to the credit crunch.

HBOS said write-downs and losses on bad debts for the first nine months of 2008 now stood at £5.2 billion, up £2.7 billion from the end of June.

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News posted: November 3, 2008

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