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Santander 'agrees' A&L takeover Santander agrees £1.2bn A&L deal
(19 minutes later)
Spanish bank Santander says it has agreed a deal to buy Alliance & Leicester (A&L) for about £1.26bn. Spanish bank Santander has agreed a deal to buy UK lender Alliance & Leicester (A&L) for about £1.26bn.
Shares in A&L soared by nearly 50% on Monday after it disclosed that it had received a bid approach, which the BBC revealed was from Santander.Shares in A&L soared by nearly 50% on Monday after it disclosed that it had received a bid approach, which the BBC revealed was from Santander.
A&L said it was in "advanced" talks about a deal but has yet to confirm that it has been finalised. Santander is effectively offering 317 pence per A&L share and expects the deal to be completed by October.
BBC business editor Robert Peston says the deal with Abbey-owner Santander may pose competition issues. But BBC business editor Robert Peston says the deal with Abbey-owner Santander may pose competition issues.
If successful, Santander plans to merge A&L with Abbey, which it bought in 2004. Santander plans to merge A&L with Abbey, which it bought in 2004, leading unions to express fears about job losses.
There will be some concern that the disappearance of A&L as an independent entity would leave too much power in the hands of the big banks Robert Peston, BBC Business Editor Read Robert's thoughtsSee Alliance sharesSee other bank sharesWhat it means for customersThere will be some concern that the disappearance of A&L as an independent entity would leave too much power in the hands of the big banks Robert Peston, BBC Business Editor Read Robert's thoughtsSee Alliance sharesSee other bank sharesWhat it means for customers
"The takeover – if successful – would be a great relief to the City watchdog, the Financial Services Authority – because it believes big banks are more robust in these uncertain times," our correspondent said."The takeover – if successful – would be a great relief to the City watchdog, the Financial Services Authority – because it believes big banks are more robust in these uncertain times," our correspondent said.
"However Alliance & Leicester has been a source of important competition in the UK's relatively concentrated banking market," he added."However Alliance & Leicester has been a source of important competition in the UK's relatively concentrated banking market," he added.
"So there will be some concern that the disappearance of A&L as an independent entity would leave too much power in the hands of the big banks.""So there will be some concern that the disappearance of A&L as an independent entity would leave too much power in the hands of the big banks."
'No certainty' 'Strong business'
A&L said the approach being discussed was for 317 pence per share - but it warned that it could not be sure that a deal would be "forthcoming". A&L is recommending the bid to its shareholders, who will have to approve the transaction before it can go ahead.
Like other British lenders, Alliance & Leicester has seen its share price slump due to the credit crunch. Like other British lenders, A&L has seen its share price slump due to the credit crunch.
Alliance said it had disclosed details of the bid "without the consent" of the suitor. But unlike other leading UK banks, it has not had to tap its shareholders for additional cash to shore up its balance sheet.
It added: "There can be no certainty that an offer will be forthcoming or as to its terms." The board is acutely aware of the significant external risks presented by the deterioration in economic conditions and the continuing turbulence in the financial markets Roy Brown, Alliance and Leicester
Unlike other leading UK banks and mortgage lenders, Alliance & Leicester has not had to tap its shareholders for additional cash to shore up its balance sheet. Yet, A&L said the current tough economic climate made the deal even more attractive.
"A&L is a strong and attractive business and its resilient performance is proof of the quality of its franchise," said its acting chairman Roy Brown.
"However, the board is acutely aware of the significant external risks presented by the deterioration in economic conditions and the continuing turbulence in the financial markets."
Alliance saw its annual profits fall 30% last year amid turbulence in credit markets, which has forced it to write down the value of mortgage-backed investments by nearly £400m.Alliance saw its annual profits fall 30% last year amid turbulence in credit markets, which has forced it to write down the value of mortgage-backed investments by nearly £400m.
Like other lenders, Alliance has reacted to the credit turmoil by reducing the number of mortgages it sells and pushing up the interest rates.Like other lenders, Alliance has reacted to the credit turmoil by reducing the number of mortgages it sells and pushing up the interest rates.
Union concerns
The proposed deal would boost Santander's presence in the UK, it said.
"We are very pleased to be working with the management and employees of A&L as we seek to build with Abbey one of the leading franchises in the UK banking sector," said its chairman Emilio Botin.
But unions said they were worried about the implications of the deal for High Street jobs.
"Staff at A&L deserve to have answers about their future and we urge the company to be upfront about their intentions," said Andy Kerr deputy general secretary of the Communication Workers Union.
Following the news of the bid approach, Alliance's shares rose 93p, or 42%, to 312.25p.Following the news of the bid approach, Alliance's shares rose 93p, or 42%, to 312.25p.
Shares in other lenders soared on the news, with Bradford and Bingley shares rising by more than 25%.Shares in other lenders soared on the news, with Bradford and Bingley shares rising by more than 25%.
Are you affected by issues covered in this story? Are you an Alliance and Leicester customer, shareholder or staff member? Send us your comments using the form below.Are you affected by issues covered in this story? Are you an Alliance and Leicester customer, shareholder or staff member? Send us your comments using the form below.
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