Lloyds reveals details of £12bn HBOS takeover

Lloyds TSB unveiled details today of its £12.2bn (€15.5bn) takeover of ailing rival Halifax Bank of Scotland.

The deal, which is subject to shareholder agreement as well as ratification from the British Financial Services Authority, will create a new banking giant with around a third of the UK mortgage and savings markets. It will be headed by Lloyds TSB’s current chairman and chief executive Eric Daniels.

HBOS chairman Dennis Stevenson said: “This is the right transaction for HBOS and its shareholders.”

Lloyds will offer 0.83 of its shares for each HBOS share, valuing them at 232p each.

Analysts have estimated that as many as 40,000 jobs could be lost from the banks' combined 145,000 staff. HBOS has 75,000 staff and the remainder work at Lloyds TSB.

Mr Daniels declined to give details on the number of jobs that could be lost as a result of the merger.

Of the 40,000 figure estimated by analysts, he said: “Undoubtedly there will be some job losses. But I don’t recognise that, it seems on the high side.”

He added that no decision had been made about the future of various HBOS and Lloyds TSB brands.

Mr Daniels added: “I don’t think there should be the impression that this is a shotgun marriage. This is something that has been looked at for a good long while.”

He said the most recent talks between the two parties took place over the “past several weeks”.

The deal agreement said: “Significant cost savings can be made by combining the networks and back offices of Lloyds TSB and HBOS.”

It added that the takeover would result in “cost synergies” of £1bn (€1.3bn) by 2011, or around 10% of the combined cost base.

There will be “elimination of branch duplication” in the retail arm. HBOS has 1,100 branches, and Lloyds TSB 1,900, including 160 of its Cheltenham & Gloucester arm.

There will also be “consolidation of head office functions”, including human resources, finance and legal departments.

The deal comes after a run on HBOS shares this week which has seen the group’s share price fall as much as 70%.

British Business Secretary John Hutton confirmed the government would push through the merger on public interest grounds to "ensure the stability of the UK financial system".

An order allowing this will be laid before the British Parliament when the House returns after the summer recess.

Currently public interest grounds cover only plurality of media ownership and national security. Mr Hutton’s decision follows advice from the UK tripartite authorities – HM Treasury, Bank of England and the Financial Services Authority (FSA).

The FSA described today’s takeover announcement as a welcome move.

It said: “As previously stated, the FSA is satisfied that HBOS is a well-capitalised bank that continues to fund its business in a satisfactory way. The announcement of the proposed merger with Lloyds TSB is a welcome move as it is likely to enhance stability within financial markets and improve confidence among customers and investors in the UK financial sector.”