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Government talks with Lloyds HBOS Government talks with Lloyds HBOS
(41 minutes later)
The government is in close contact with those involved in the Lloyds takeover of of HBOS, said a spokesman for UK Prime Minister Gordon Brown. The government is in close contact with those involved in the Lloyds TSB takeover of HBOS, a spokesman for Prime Minister Gordon Brown has said.
Mr Brown has already stated he is confident the takeover will go ahead despite intensifying speculation that Lloyds could renegotiate the deal. There has been concern that recent volatility in banking shares meant the deal would be renegotiated or scrapped.
HBOS shares fell almost 14% on Tuesday but had risen 20.1% to 147p in early afternoon trading on Wednesday. But the BBC's business editor Robert Peston has said he understands that the Lloyds-HBOS deal will go ahead.
Recent falls mean HBOS is worth much less than Lloyds offered for it. HBOS shares rose 34% on Wednesday but are still worth less than Lloyds offered for the firm two weeks ago.
There has been speculation that Lloyds could renegotiate the deal because of the falls in HBOS's share price but BBC business editor, Robert Peston, said people close to the deal had told him there was no chance that Lloyds would change the terms of the takeover.
Stormy timeStormy time
Under the terms of the deal HBOS investors were offered 0.83 Lloyds TSB shares for every HBOS share they own. Under the terms of the deal, HBOS investors were offered 0.83 Lloyds TSB shares for every HBOS share they own.
Based on Lloyds TSB's closing share price the day before the deal was formerly announced, this valued HBOS at £12.2bn, or 232 pence per share.
But since then banking shares have had a rollercoaster time, and HBOS shares have fallen in value.
Based on Tuesday's closing price, Lloyds offer now values HBOS at 188p a share, whereas HBOS shares closed at 122.5p. This led to worries that the terms of the deal might have to be revised.
But speaking to Sky News, Mr Brown said that after having spoken to those concerned, he was confident the deal would go ahead.
But he was keen to stress that this was a "matter for shareholders not a matter for government".
First things first: if Lloyd's TSB's takeover of HBOS were to collapse, HBOS itself would collapse and we would all be staring into the abyss. So that's not going to happen Robert Peston, BBC Business Editor Robert Peston's blogFirst things first: if Lloyd's TSB's takeover of HBOS were to collapse, HBOS itself would collapse and we would all be staring into the abyss. So that's not going to happen Robert Peston, BBC Business Editor Robert Peston's blog
Responding to whether the government would bail out HBOS were the deal to collapse, Mr Brown said that the government had already "dealt" with this by helping the merger take place. Based on Lloyds TSB's closing share price the day before the deal was formally announced, this valued HBOS at £12.2bn, or 232 pence per share.
"We changed the competition law to make it possible," he added. But since then banking shares have had a rollercoaster time, and HBOS shares have fallen in value.
Full steam ahead? Based on Tuesday's closing price, Lloyds offer now values HBOS at 188p a share, whereas HBOS shares closed at 122.5p. This prompted worries that the terms of the deal might have to be revised.
Analysts are cautious about the likelihood of the deal going ahead. However as the deal had been backed by the government and the Prime Minister had staked his reputation on it going ahead, the deal will take place, Robert Peston said.
But an HBOS spokesperson said it was "full steam ahead" and that it was "the right deal for HBOS shareholders". The Prime Minister's spokesperson reiterated that Mr Brown said that after having spoken to those concerned, he was confident the deal would be sealed.
On Tuesday, Lloyds said the deal was on track and should be completed by the end of 2008. 'Capable hands'
"This is a fantastic opportunity to create one of the UK's leading financial services groups," a spokesman said.
The positive mood was echoed by Sir Brian Pitman, former chairman of the Lloyds TSB Group.The positive mood was echoed by Sir Brian Pitman, former chairman of the Lloyds TSB Group.
Talking to the BBC, Sir Brian said the deal was "in very capable hands". In a BBC interview Sir Brian said the deal was "in very capable hands".
"It's important that the deal goes through and I'm confident it will go through," he said."It's important that the deal goes through and I'm confident it will go through," he said.
An HBOS spokesperson said on Wednesday that it was "full steam ahead" and that it was "the right deal for HBOS shareholders".
Lloyds had also said the deal was on track and should be completed by the end of 2008.
"This is a fantastic opportunity to create one of the UK's leading financial services groups," a spokesman for Lloyds said.
ConsolidationConsolidation
Markets and banking stocks have been adversely affected after the US House of Representatives rejected the proposed $700bn (£380bn) banking bail-out, though hopes have been raised that the US Senate will approve a modified version on Wednesday.Markets and banking stocks have been adversely affected after the US House of Representatives rejected the proposed $700bn (£380bn) banking bail-out, though hopes have been raised that the US Senate will approve a modified version on Wednesday.
HBOS is just one of several banks to require external help since the start of the credit crunch.HBOS is just one of several banks to require external help since the start of the credit crunch.
HBOS entered into the agreement with Lloyds when its share price fell sharply during a period of huge financial upheaval.HBOS entered into the agreement with Lloyds when its share price fell sharply during a period of huge financial upheaval.
Already that week US investment bank Lehman Brothers filed for bankruptcy, Bank of America acquired Merrill Lynch and the US Federal Reserve announced a $85bn rescue package for insurance giant AIG.Already that week US investment bank Lehman Brothers filed for bankruptcy, Bank of America acquired Merrill Lynch and the US Federal Reserve announced a $85bn rescue package for insurance giant AIG.
Last year Northern Rock was nationalised and only this week the government confirmed that it would also take over mortgage lender Bradford & Bingley.Last year Northern Rock was nationalised and only this week the government confirmed that it would also take over mortgage lender Bradford & Bingley.
On Tuesday Belgian-French bank Dexia became the second Belgian bank to be bailed out after rival banking and insurance giant Fortis crumbled and was partly nationalised.On Tuesday Belgian-French bank Dexia became the second Belgian bank to be bailed out after rival banking and insurance giant Fortis crumbled and was partly nationalised.
"We shall wind up, I think, with five or six very, very big, very safe banks [in the UK] at the end of this exercise, it's a process of clearing out the stable," said Sir Brian."We shall wind up, I think, with five or six very, very big, very safe banks [in the UK] at the end of this exercise, it's a process of clearing out the stable," said Sir Brian.
"It happens every time and it likely to happen again," he added."It happens every time and it likely to happen again," he added.
A deal between HBOS and Lloyds would create a business with almost a third of the UK's mortgage market with some 3,000 branches.A deal between HBOS and Lloyds would create a business with almost a third of the UK's mortgage market with some 3,000 branches.
Are you a Lloyds TSB shareholder? Do you want to see a renegotiation of the HBOS takeover? Send us your comments on the form below.Are you a Lloyds TSB shareholder? Do you want to see a renegotiation of the HBOS takeover? Send us your comments on the form below.
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