BSCH could drop Abbey offer

THE Spanish bank poised to take over British mortgage lender Abbey National will walk away if the £8.2 billion deal (€12.3 billion) is stalled by competition concerns, it was reported yesterday.

Banco Santander Central Hispano (BSCH) is understood to fear a rival bid from a British bank, leading to a drawn-out investigation by competition authorities.

Reports from Britain said BSCH was concerned about the potential damage to Abbey’s business by a probe that could last longer than 24 weeks.

Earlier this month it emerged that British banking giant HBOS, which was formed from the merger of former building society Halifax and Bank of Scotland, was examining whether to mount a counter-bid.

It is likely a firm offer would attract the scrutiny of the Competition Commission, the British equivalent of the Competition Authority, as around 70% of Abbey’s 741 branches are within a quarter of a mile of a HBOS branch.

This could lead to a number of branches being closed while the combined group would have 34% of the mortgage market and almost 25% of savings accounts.

BSCH fears a repeat of the £18 billion (€26.5 billion) attempted takeover of Abbey by Lloyds TSB in 2001, which was frustrated after a lengthy probe into the potential impact on competition.

It hopes to complete the acquisition by the end of the year but must first win the approval of shareholders, many of whom are believed to have doubts.

The takeover has the support of the board at Abbey, which is Britain’s second biggest provider of mortgages and savings and which turned down a Bank of Ireland approach in 2002.

Abbey has reported two years of heavy losses, although it returned to the black during the six months to June 30 with profits of £350 million (€517 million) against losses of £144 million last time.

BSCH is currently valued at around £30 billion (€44 billion) and has a strong presence in Europe and Latin America, employing more than 100,000 people.

It expects the combination to provide cost savings and revenues benefits worth €560 million (£370.1 million) within three years of the deal being completed.