Lloyds TSB shareholders to vote on HBOS merger

Lloyds TSB shareholders will today vote on the bank’s rescue takeover of ailing rival HBOS.

If the deal gets the go-ahead, it will create a banking giant with around 145,000 staff and 3,000 branches across the UK.

Competition rules have been waived to allow the deal but unions worried over thousands of possible job cuts through the £1.5bn (€1.77bn) in planned cost savings will protest at the Glasgow meeting.

Unite joint general secretary Derek Simpson said: “Employees from HBOS and Lloyds deserve to have their concerns heard at the shareholders meeting. Along with the loyal customers, employees of Lloyds and HBOS are the life-blood of these banks.

“The protesters will demand that Lloyds shareholders do not merely consider the financial rewards of a takeover of HBOS, but the wider social and employment implications.”

Lloyds’ management believe the proposed deal “represents a compelling opportunity” to create the UK’s leading financial services group.

HBOS investors will receive 0.605 of a Lloyds share for every one of their own shares, in a deal valuing HBOS at £4.3bn (€5.09bn) based on last night’s closing prices.

HBOS shareholders will vote themselves on whether to accept the deal in December, but were warned by their own chairman Dennis Stevenson last week of the risk of nationalisation if the takeover falls through.

As well as the HBOS takeover, Lloyds shareholders will also vote on plans to raise a total of £5.5bn (€6.5bn) through the issue of new shares and special preference shares to strengthen its balance sheet.

Lloyds will not be able to pay dividends as long as any of the £1bn (€1.18bn) in preference shares held by the Government are outstanding.

HBOS is also planning to raise £11.5bn (€13.6bn) through a Government underwritten share offer and preference shares. If the new shares offered by both banks are snubbed – which is likely as their stock is currently trading more cheaply on the open market – the Government will be left with a stake of more than 40% in the combined entity.

But if the takeover does not go ahead the Financial Services Authority (FSA) has told Lloyds it would need to strengthen its balance sheet by £7bn (€8.3bn) - with no guarantees over whether it could successfully raise the funds.

And shareholders in those banks preparing to use taxpayers’ billions to shore up their balance sheets were yesterday warned by Chancellor Alistair Darling that any future public bailout would be far more costly if they rejected the current deals on the table.