Halifax Plans BoS Merger to Create `Fifth Force' in Banking
Chris Hughes Financial Editor, The Independent (London, England)
SHARES IN Bank of Scotland soared 8 per cent yesterday amid speculation that the disclosure of plans for a nil-premium pounds 28bn merger with the Halifax would flush out a counterbid for the bank.
The City took a sharp intake of breath upon the confirmation that Peter Burt, BoS's chief executive, was in talks with James Crosby, his opposite number at Halifax, on a nil-premium deal. Mr Burt's previous attempt at such a merger, with Abbey National ended in failure when Abbey shareholders said they wanted to see whether the Government would allow a higher offer from Lloyds TSB to proceed.
One leading banking analyst, who declined to be named, said: "This is Lloyds-Abbey all over again. Nil premium mergers - I can't think of one that's worked out. Peter Burt has fallen into the same trap again."
BoS's marginal presence south of the border means there would be little overlap of branches with many UK banks, and Barclays, headed by Matt Barrett, was seen as the most likely contender to gatecrash the talks between Messrs Burt and Crosby. "Barrett has said he wants to get into Europe, but that's what Lloyds said before it bid for Abbey. BoS would be a great fit for Barclays," said another analyst.
Halifax and BoS said any transaction would be structured on a one- for-one share exchange ratio. That would give Halifax shareholders ownership of 62 per cent of the combined group. BoS shares closed at 803p, valuing the company at pounds 10.4bn, while Halifax stock finished at 768p, a rise of 4.1 per cent that valued the group at pounds 17.3bn. Halifax, Britain's largest mortgage lender, floated in June 1997, its shares commencing trading at 775p. The companies are likely to publish final terms of the deal before 12 June, when the Competition Commission is due to give its verdict on whether Lloyds' bid for Abbey is against the public interest.
According to City estimates, a tie-up between Halifax and BoS would generate cost savings of about pounds 350m - similar to those claimed for the merger BoS once mooted with Abbey - with a further pounds 150m in revenue benefits arising from cross-selling opportunities. …