Lloyds seals $22 billion rescue deal for HBOS
Written on September 18, 2008
Lloyds TSB (LLOY.L: Quote, Profile, Research, Stock Buzz) sealed a rescue takeover of HBOS Plc (HBOS.L: Quote, Profile, Research, Stock Buzz) on Thursday to create a dominant British mortgage and savings bank in a $22 billion deal helped through by the government.
A change in competition law ensured the credit crunch did not claim another victim, after HBOS shares were battered in the past week by fears it was struggling to raise funds in wholesale markets.
The focus on HBOS came as other banks around the world staggered under the weight of the crisis and recalled the state bailout of UK bank Northern Rock in February.
Lloyds will offer 0.83 of its shares for each HBOS share, valuing them at 232 pence based on Wednesday’s closing prices, or a 58 percent premium. The deal values HBOS at 12.2 billion pound ($21.7 billion), only a quarter of its value a year ago.
By 6:10 a.m bad credit payday loan. EDT, HBOS shares had jumped 44 percent to 212p while Lloyds shares added 1 percent to 282.25p, nudging the value of the deal to 234p per HBOS share.
“We had expected HBOS would struggle to make a profit through 2010, but we had not expected it would fall victim to the credit crunch,” said Sandy Chen, analyst at Panmure Gordon.
“The specter of another run on customer deposits, combined with the run on wholesale funding that HBOS has been experiencing, was what pushed HBOS into the arms of Lloyds TSB, with the support of the UK government,” Chen added.
Lloyds said it expects the deal to boost annual earnings by over 1 billion pounds a year by 2011 through cost savings and boost its earnings per share by over 20 percent a year.
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