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Bank duo oppose Lloyds-HBOS deal Bank duo oppose Lloyds-HBOS deal
(2 days later)
The former chief executives of Bank of Scotland and Royal Bank of Scotland have written to HBOS calling for its chairman and chief executive to resign. Two former bank chief executives are attempting to block the £12bn takeover of HBOS by Lloyds TSB, saying it should remain independent.
The writers, Sir Peter Burt and Sir George Mathewson, are trying to "blow up" the takeover of HBOS by Lloyds TSB, says BBC business editor Robert Peston. Sir Peter Burt, formerly of the Bank of Scotland, and Sir George Mathewson, ex-head of the Royal Bank of Scotland, say they should be appointed to lead HBOS.
Sir Peter and Sir George say HBOS and its shareholders would be better off if the bank were to remain independent. Sir Peter said a takeover would leave HBOS shareholders and staff worse off.
HBOS said the deal with Lloyds TSB was a "superior proposition". But HBOS said the men's plan offered no value for its shareholders and it could see no grounds for further talks.
The bank said Sir Peter and Sir George had not put forward a substantive offer for HBOS. In a letter to HBOS chairman Lord Dennis Stevenson, Sir George and Sir Peter called for his immediate resignation and that of the bank's chief executive, Andy Hornby.
"In short there is no money on the table," said a spokesman. It's a fantastic deal for Lloyds but it's not a good deal for anybody else Sir Peter Burt, former chief executive of the Bank of Scotland
"We do not believe their proposal offers a significant prospect of value for HBOS shareholders." This, they said, would allow them to take over temporarily as chairman and chief executive and put in place a plan to keep the bank independent.
A Treasury spokesman said the £12.2bn merger with Lloyds TSB was still on course. Sir Peter told the BBC Lloyds TSB was no safe haven for HBOS
"In the real world nothing has happened yet," he said. "Unless parties formally change their minds, then this merger with Lloyds will go ahead." "The black horse has got two broken legs," he said, referring to the company's symbol.
Lloyds TSB has said that its acquisition of HBOS would save it at least £1.5bn ($2.4bn) a year, raising fears of heavy job losses from the merger. "It's a fantastic deal for Lloyds but it's not a good deal for anybody else."
But HBOS said a "well-developed deal" with Lloyds TSB was on track, that provided certainty to its shareholders and real financial benefits.
In contrast, Sir Peter and Sir George had not put forward a substantive offer for HBOS, the bank said.
Its chairman Lord Stevenson has written a formal reply to the pair, saying his board sees "no basis for future discussion".
'Alternative plan'
Shane O'Riordain, head of communications at HBOS, said the men were not offering shareholders anything - no cash, no value nor any certainty.
"All they are simply saying is they would come in and run the company instead," he added.
"Together with Lloyds TSB we will be a stronger group, a group in a better position to access funding and... after all funding is the lifeblood of any bank."
It's impossible to ignore the very formidable obstacles faced by Sir Peter Burt and Sir George Mathewson BBC Business Editor Robert Peston Read Robert Peston's blogText of the Burt-Mathewson letterHBOS statement in full
Lloyds TSB has said its acquisition of HBOS would save it at least £1.5bn ($2.4bn) a year, raising fears of heavy job losses from the merger.
The letter-writers argue HBOS no longer needs to be rescued by Lloyds TSB, because the government and Bank of England have offered vital funds to replace those that could be withdrawn by money managers and other creditors.The letter-writers argue HBOS no longer needs to be rescued by Lloyds TSB, because the government and Bank of England have offered vital funds to replace those that could be withdrawn by money managers and other creditors.
Their initiative may be particularly welcomed in Scotland, where there has been widespread concern that the takeover would lead to significant job losses BBC Business Editor Robert Peston Read Robert Peston's blogFull text of the HBOS letter
"It is our intention to create a detailed alternative plan that we believe will represent better value for both the HBOS shareholders and stakeholders alike by keeping HBOS as an independent bank," their letter says."It is our intention to create a detailed alternative plan that we believe will represent better value for both the HBOS shareholders and stakeholders alike by keeping HBOS as an independent bank," their letter says.
Speaking from his Perthshire home, Sir George said: "It is a lengthy, detailed letter. Speaking from his Perthshire home, Sir George said: "We do not believe the alternatives to the Lloyds takeover of HBOS have been properly explored.
"We do not believe the alternatives to the Lloyds takeover of HBOS have been properly explored. And, that this deal was conceived in response to a particular problem and then the world changed a week later. "And, that this deal was conceived in response to a particular problem and then the world changed a week later.
Members of the public give their views
"As such that deal is no longer the proper deal for the shareholders of HBOS or anybody else.""As such that deal is no longer the proper deal for the shareholders of HBOS or anybody else."
On calling for HBOS' chairman and chief executive to resign, Sir George added: "They are leaving the business soon anyway... So we are suggesting they stand down and we step in for an interim period and we do our best to see what other solution we could put in place." Sir Peter added: "Why would the government want to push through a merger which the Office of Fair Trading has said is against the public interest; jobs will be lost north and south of the border; it is anti-competitive; it is not good for staff; it is not good for customers; and it is not good for shareholders?"
BBC business editor Robert Peston said the pair would now canvas shareholders to try to requisition an emergency meeting to have Lord Stevenson and Mr Hornby removed.
Deal 'on course'
The intervention by Sir Peter and Sir George will be difficult for the board of HBOS to ignore, not least because the former is credited with creating HBOS.The intervention by Sir Peter and Sir George will be difficult for the board of HBOS to ignore, not least because the former is credited with creating HBOS.
They are the two outstanding figures in the Scottish financial sector over the last generation, and therefore their views command great respect First Minister Alex Salmond
He was chief executive of Bank of Scotland when it merged with the Halifax to form HBOS.He was chief executive of Bank of Scotland when it merged with the Halifax to form HBOS.
An HBOS spokesman said their proposal assumed the government capital would be on offer to them.
A Treasury spokesman said the merger with Lloyds TSB was still on course.
"In the real world nothing has happened yet," he said. "Unless parties formally change their minds, then this merger with Lloyds will go ahead."
They are the two outstanding figures in the Scottish financial sector over the last generation, and therefore their views command great respect First Minister Alex Salmond
In relation to the £17bn taxpayer bail-out of HBOS, the spokesman said the government would have to "look again at any taxpayer support if the merger didn't go ahead".
The BBC's Robert Peston said he sensed the Treasury was not keen on putting more taxpayers' money into HBOS and the odds of the two men pulling off their plans were "very slim".
He said the chancellor, Alistair Darling, had already made it clear he was not enthusiastic about HBOS operating as a stand-alone business and Gordon Brown was not likely to abandon his backing for the Lloyds takeover.
A copy of the letter was also sent to First Minister Alex Salmond, who said he would give what it had to say "the most careful consideration".A copy of the letter was also sent to First Minister Alex Salmond, who said he would give what it had to say "the most careful consideration".
He said: "They are the two outstanding figures in the Scottish financial sector over the last generation, and therefore their views command great respect."He said: "They are the two outstanding figures in the Scottish financial sector over the last generation, and therefore their views command great respect."
Mr Salmond emphasised that all propositions on the future of HBOS would be considered in terms of the best interests of Scottish jobs, business, personal customers and the wider Scottish economy. The Scottish National Party has been highly critical of the takeover. There are 17,000 jobs at stake in Scotland and it has become a highly-charged political issue.
BBC business editor Robert Peston said: "Burt and Mathewson are persuaded that HBOS would be viable as an independent, thanks to the massive taxpayer support offered to all the banks in October by the Treasury." Mr Salmond emphasised all propositions on the future of HBOS would be considered in terms of the best interests of Scottish jobs, business, personal customers and the wider Scottish economy.
Our correspondent says Sir Peter and Sir George have sent the letter to the chairman of HBOS, Sir Dennis Stevenson.
Highly critical
In it they say Sir Dennis and HBOS chief executive Andy Hornby should resign immediately - and that Sir George Mathewson should become the new chairman of the bank and Sir Peter Burt should be its chief executive.
"Burt and Mathewson would stay in post long enough to ensure that HBOS was once again perceived to be on a sound footing," says our correspondent.
"They would commit to recruit new credible management for the top positions at the bank, to make themselves redundant just as soon as the bank's owners felt that was prudent.
"They will canvas shareholders in an attempt to requisition an emergency meeting to have Stevenson and Hornby removed, if they won't go of their own accord."
The initiative may be popular in Scotland, where there has been widespread concern the takeover would lead to significant job losses.
There are also worries a takeover could damage the position of Edinburgh - the location of HBOS's imposing head office - as a financial centre.
The Scottish National Party has been highly critical of the takeover.
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