Details of Abbey takeover deal still under wraps

Abbey National today said it had reached agreement with Banco Santander Central Hispano (BSCH) on the terms of a takeover by the Spanish bank.

However, the UK bank did not reveal the financial details of the cash and shares deal, which is expected to be worth in the region of £8.5bn (€12.85bn).

In a brief statement, Abbey said the full terms and conditions of the offer from Spain’s largest bank would be announced later today.

If the tie-up wins the approval of shareholders, it will create the fourth largest bank in Europe and the eighth largest in the world.

BSCH is expected to offer between 550p and 580p a share, valuing Abbey at more than £8bn (€12.1bn), although the final value of the offer will depend on the closing price of BSCH’s shares on the day the bid is tabled.

It is thought Abbey shareholders would be given shares in the new enlarged BSCH group, with around 10% being in cash.

Shares in Abbey closed up 18% at 580p on Friday following confirmation that it was involved in talks, but the BSCH offer price represents a premium of around 40% on the 420p shares were trading at before takeover rumours boosted their price.

The price eased 22p to 558p today as the London forecast an offer at the lower end of market expectations.

The proposed deal could yet be scuppered by a counter-bid from another bank, which most analysts believe could come from US-based Citigroup.

Many members of the former building society stand to benefit from today’s announcement as they still hold windfall shares given to them as part of the company’s flotation in 1989.

However, the value of the paper has still fallen from a peak of £13 at the time of a failed takeover attempt by Lloyds TSB in 2001.

That deal was blocked by competition authorities and was followed by several other attempts by banks – including Clydesdale owner National Australia Bank - to land the group.

Shares have fallen on the back of two years of heavy losses as the UK’s second biggest provider of mortgages and savings faced up to costly one-off charges from its investments in corporate banking.

Abbey has since shed jobs, sold non-core assets and reorganised its operations in a three-year overhaul that has seen it drop the National part of its brand name.