HBOS shareholders will gather tomorrow to vote on the bank’s rescue takeover by Lloyds TSB and a £11.5bn (€12.95bn) taxpayer bail-out.
Approval at the meeting in Birmingham will clear the way for the creation of a banking giant with around 145,000 staff and 3,000 branches across the UK.
HBOS chairman Dennis Stevenson has warned that the bank could face full nationalisation if shareholders fail to approve the deal.
The Government is already set to own as much as 43.5% of the combined entity - to be known as Lloyds Banking Group – after underwriting a total of £13bn (€14.6bn) in new shares offered by the duo to strengthen their balance sheets rocked by recent financial turmoil.
These new shares are likely to be snubbed by existing investors because the offer price is above the current share prices of the duo.
Current HBOS investors – which include two million smaller shareholders – will be left with a stake of just 20% in the combined bank, with Lloyds TSB shareholders owning 36.5%.
Competition concerns over the HBOS takeover have been put aside in the interests of financial stability.
The Merger Action Group (MAG), a group of businessmen, bank customers and shareholders opposed to the deal, lost a legal challenge to prevent the takeover this week.
Tomorrow’s meeting at the NEC will see shareholders vote on plans for the £8.5bn (€9.57bn) offering of ordinary shares, as well as £3bn (€3.37bn) in preference shares to be held by the Government.
These come with strings attached such as a ban on dividend payouts while outstanding.
HBOS needs votes from shareholders representing 75% of shares for the capital raising and the acquisition – although for the takeover it must also win support from a simple majority of shareholders as well.
Lloyds TSB shareholders backed the proposed takeover by an overwhelming majority in Glasgow last month, as well its own plans to raise £5.5bn (€6.19bn) in ordinary shares and preference shares.
Royal Bank of Scotland – the biggest banking casualty of the crisis – is now 58% state-owned after its shareholders also approved a mammoth £20bn (€22.52bn) capital injection in November.