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Economy

Lloyds new HBOS takeover offer

Written by Gary Howes

Monday, 13 October 2008

Bank also releases details of recapitalisation scheme.

Lloyds TSB (LON:LLOY) has announced its new takeover terms for the acquisition of HBOS (LON:HBOS).

The move puts an end to speculation that has arisen over the past few weeks regarding the deal. It was thought that some shareholders were unhappy with an overvaluation of the HBOS shares.

In a statement released this morning Lloyds TSB cited unprecedented volatility in global markets as being behind the revision of terms.

After discussions held with the Financial Services Authority (FSA) the revised terms agreed with HBOS are that HBOS shareholders will receive 0.605 Lloyds TSB shares for every 1 HBOS share. At the same time, an offer will also be made to HM Treasury to exchange HM Treasury preference shares in HBOS for equivalent preference shares in Lloyds TSB.

The board of Lloyds TSB will now hope that shareholders vote in favour of the new conditions of the takeover

The Board of HBOS has also agreed to recommend these revised terms to its shareholders. The Takeover Panel has given its consent to the revision of terms.

The bank will also offer HM Treasury to exchange HM Treasury preference shares in HBOS for equivalent preference shares in Lloyds TSB.

Recapitalisation

Lloyds TSB and HBOS are two of the banks that announced this morning that they would be seeking part of the Governments £37b recapitalisation package.

As part of the recapitalisation scheme Lloyds TSB £17 billion of capital will be raised, of which £11.5 billion (£8.5 billion in ordinary shares and £3 billion in preference shares) will be raised by HBOS and £5.5 billion (£4.5 billion in ordinary shares and £1 billion in preference shares) by Lloyds TSB.

Commenting on the developments, Sir Victor Blank, Chairman of Lloyds TSB said:

“Today’s news is good for investors and customers alike. Lloyds TSB’s already robust financial position is further enhanced by today’s capital raising which in turn allows us to drive forward with our plans to acquire HBOS. Our trading update underlines that our core business is strong and growing. Our customers can feel confident that their money is secure. Lloyds TSB is and remains a great place to bank.”