HBOS Abbey bid a long way off
SHARES in Abbey National jumped in value today after HBOS admitted it may come in with a counter bid to the £8.2bn agreed takeover offer from Banco Santander Central Hispano, Spain's largest bank.
Dealers were cautious on the news, pointing out that the former Halifax and Bank of Scotland had a long way to go before it could launch a bid, and even then could face serious problems from the competition authorities.
An HBOS spokesman said: 'Our basic position is that this is something we are looking at, but it is going to be a long process. Something or nothing could come of it. We haven't even begun to talk about numbers.'
He said that an offer of £9bn which was suggested at the weekend was 'pure speculation'.
'HBOS knows that the only possible transaction that can fly is a friendly one which benefits all stakeholders. It is all about getting the balance right,' he added. HBOS shares were expected to fall 16p to 696p.
Abbey's 1.75m small shareholders are thought to be reluctant to accept the Spanish bank's takeover bid which is currently almost entirely in its own shares.
These are not traded in London, and although Santander said it will offer a free selling mechanism and offered to pay dividends in sterling, a bid from a British institution is likely to be more attractive to private investors.
HBOS chief executive James Crosby said last week he believed that any large British bank would have problems getting a bid for Abbey through the Competition Commission.
An £18bn bid from Lloyds TSB was blocked by the Competition Commission three years ago.
However, the Abbey spokesman said Crosby had been specifically referring to the big four UK High Street banks although 'he was not underestimating the possible difficulties there could be'.
Any investigation into a merger between HBOS and Abbey National is likely to centre on mortgages, because they are the number one and number two players in the British market.
HBOS has around 23% of all mortgages and Abbey about 13%, although in terms of new mortgages both institutions have been cutting their market share as interest rates have risen to 17% and 6% respectively.
Interestingly, the Competition Commission report into the Lloyds/Abbey merger concluded that mortgages was not a problem because this was the most competitive area of financial services in the UK with more than 100 different lenders, and that any price pressure was downwards.
A merger of HBOS and Abbey would also lead to fears over job losses and the closure of branches which are duplicated in many High Streets.
Abbey shares closed at 567p on Friday, some 14p above the value of the Santander offer. In early afternoon trading today, the shares were up 12p at 579p.
The Spanish bank will seek shareholder approval for its bid in the middle of next month.
