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Brown bid to calm fears over HBOS takeover
PRIME Minister Gordon Brown said last night that he remained confident the takeover of Halifax Bank of Scotland would go ahead.
Earlier the bank's shares had nosedived on rumours bosses at Lloyds TSB were planning to slash their offer for the business.
HBOS shares tumbled as much as 20 per cent at one point yesterday amid fears the whole 12.2bn deal could be in jeopardy.
But they later recovered some of their losses to close down 13.8 per cent at 126.2p, as market experts said a repricing of the offer was also possible – deepening the losses facing its two million shareholders.
Another volatile day for stock markets was compounded by confirmation that the UK economy has ground to a halt. Official data showed growth was flat between April and June, making it the economy's worst quarterly performance for 16 years.
Desperate efforts were under way in the United States to try to salvage the $700bn (385bn) deal to sort out "toxic" debts which have paralysed the country's financial sector as Chancellor Alistair Darling yesterday held a series of emergency meetings over the crisis with finance chiefs and other political parties. Last night Mr Brown, who personally brokered the HBOS deal, said it was not under threat.
He said: "The shareholders will eventually have to make a decision in a few days' time about what is right for them, but I am confident by talking to the leading parties on this that not only do they want to go ahead with this but they are determined to do all the work that will make this possible."
Under the current terms shareholders in the UK's biggest mortgage lender will get 0.83 Lloyds shares for every HBOS share they own.
However, several City dealers said there was speculation Lloyds could revise its offer to 0.6 of its shares per HBOS share.
Both banks declined to comment on the rumours and said they were pressing ahead with the takeover.
But with banking stocks battered by market turmoil and the failure of US lawmakers to agree a rescue package, as well as the absence of rival suitors, it could be easier for Lloyds to make a cheaper offer.
One top 10 shareholder in Lloyds TSB said: "Within the current market HBOS is unlikely to find another bidder so Lloyds will have some flexibility in the terms according to what they find in their due diligence process."
If the deal goes ahead it will create a banking giant with nearly one-third of the UK mortgage market and more than 300bn in deposits.
Exane BNP Paribas analyst Ian Gordon said turmoil in the banking sector had reduced investor enthusiasm for the deal.
"I think Lloyds are probably finding it a slightly harder sell than normal," he said.
"The market is pricing in an increased risk that the Lloyds acquisition either won't go ahead, or that there'll be an attempt to renegotiate in Lloyds' favour."
An HBOS spokesman shrugged off concerns about the deal falling through.
"This is the right deal for HBOS shareholders," he said. "We are
already working on the integration planning process and it is full steam ahead as far as we are concerned.
"Share price volatility in bank stocks is part of the menu at the moment. These are not normal times."
A Lloyds TSB spokesman said: "We are proceeding with the deal on the terms announced on September 18. This remains a fantastic opportunity for us to create a leading financial services group and we are working diligently towards completion of the deal.
"We are subject to takeover rules and we cannot be commenting on speculation about repricing."
Shares in Lloyds climbed 4.3 per cent yesterday on the rumours to close at 226.5p. At one point HBOS shares plummeted as low as 113p.
With the eyes of the world fixed on the US, President George Bush was forced into making his fourth address to the nation in a week.
He said "Congress must act" and take decisive action quickly to get the legislative process back on track.
He said: "The reality is that we are in an urgent situation and the consequences will grow worse each day if we do not act."
Mr Brown rejected calls for the Government to guarantee all savings. He repeated his pledge to do "whatever is necessary" to get Britain through the global financial turmoil.
He again insisted that the UK was in a "far stronger position financially than in previous decades" and well placed to get through the difficulties.
Tory leader David Cameron, who makes his keynote speech at his party conference today, pledged to put aside party differences and offered the Government support for legislation to allow the Bank of England to rescue failing banks.
"Let's not allow the political wrangling and point-scoring that we've seen in America to happen here in our own country," he said.
In his speech today he will stress the problems show the need for political change in the long term.
"We must not hold back from being critical of the decisions that over 10 years have led us to this point," he will say. "We need to learn the lessons, and to offer the British people a clear choice."
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Sunday 12 February 2012
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