Taxpayer to own 43% of merged Lloyds Banking Group
The new Lloyds Banking Group, formed by the merger of Lloyds TSB and HBOS, is set to be 43.4% owned by the taxpayer, after investors bought just 0.5% of shares on offer from Lloyds TSB and 0.24% of stock on offer from HBOS.
The new banking giant is set to commence trading next week, subject to approval. It will comprise almost 150,000 staff and 3,000 branches. However, a substantial amount of job losses are expected as a result of the merger.
However, the proposed merger has met with many hurdles since it was announced last September in an attempt to prevent further turmoil in the financial system.
At the end of last month, HBOS pension fund trustees were threatening to block the proposed merger demanding better protection to be put in place for the scheme’s 80,000 members.
Furthermore, at the end of November, a group of businessmen launched a legal challenge against the proposed merger, claiming the Government’s approval was illegal.
The Merger Action Group (MAG), which was led by Malcolm Fraser, claimed that business secretary, Lord Mandelson, waived competition rules and that his decision was ‘unlawful‘.
With regard to the Lloyds TSB/HBOS merger, there was such a low take up because the price of the new shares had fallen well below the level at which they are trading at present.
However, shares in both banks have recovered slightly today with Lloyds gaining almost 4% to 136p, while shares in HBOS rose 1% to 80.8p.
The two banks join Royal Bank of Scotland, who was also bailed out by the taxpayer in November, due to the small take-up of its £15 billion share offer by investors, the Government now owns 57.9% of the bank.