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Government talks with Lloyds HBOS Government talks with Lloyds HBOS
(10 minutes later)
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.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.
There has been concern that recent volatility in banking shares meant the deal would be renegotiated or scrapped.There has been concern that recent volatility in banking shares meant the deal would be renegotiated or scrapped.
But the BBC's business editor Robert Peston has said he understands that the Lloyds-HBOS deal will go ahead.But the BBC's business editor Robert Peston has said he understands that the Lloyds-HBOS deal will go ahead.
HBOS shares rose 34% on Wednesday but are still worth less than Lloyds offered for the firm two weeks ago.HBOS shares rose 34% on Wednesday but are still worth less than Lloyds offered for the firm two weeks ago.
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.
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
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.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.
But since then banking shares have had a rollercoaster time, and HBOS shares have fallen in value.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 prompted worries that the terms of the deal might have to be revised.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.
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.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.
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.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.
'Capable hands''Capable hands'
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.
In a BBC interview Sir Brian said the deal was "in very capable hands".In a BBC interview Sir Brian said the deal was "in very capable hands".
We shall wind up, I think, with five or six very, very big, very safe banks in the UK Sir Brian Pitman, former chairman of the Lloyds TSB Group No 'floods' of switching savers
"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".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.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."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.
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. The firm entered into the agreement with Lloyds when its share price fell sharply during a period of huge financial upheaval and consolidation in the banking sector.
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.
"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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