Abbey scraps merger talks

February 28, 2001
Web posted at: 18 2 GMT

LONDON (CNN) - Abbey National called off merger talks with the Bank of Scotland on Wednesday, setting the stage for Lloyds TSB's takeover fight for the bank.

The move comes in the wake of the UK government's decision on Friday to refer Lloyd's £20 billion ($29 billion) bid for Abbey, Britain's second largest mortgage lender.

"In light of the continuing uncertainty created by Lloyds TSB, which may or may not be able to put an offer to Abbey National shareholders later this year, Abbey National has today terminated discussions with Bank of Scotland," Abbey said.

Abbey National (ANL) shares ended up 3.4 percent at 1,167 pence, Bank of Scotland (BSCT) finished up 2.3 percent at 760 pence and Lloyds TSB (LLOY) rose 1.2 percent to close at 657 pence.

"Bank of Scotland believes that if cleared by competition authorities, then Lloyds will win it," Reuters quoted a fund manager and one of Abbey's biggest shareholders as saying.

"Nobody would have voted in the interim period when there is an outstanding competition inquiry and everybody knows that a Lloyds-Abbey bid creates more value and you get a premium on the share price."

The three-way tussle marked a new wave of mergers in Britain's crowded financial services market, where shrinking margins are forcing banks to get together to drive growth.

Lloyds has said the merger will lead to an additional contribution to pretax profit from sales and cost savings of £950 million a year, of which £900 million a year is expected to be achieved by the fourth quarter of 2005.

The merger, if it goes ahead, would create Britain's second-largest banking group and would lead to the loss of some 9,000 jobs.

Abbey has rejected Lloyd's latest approach, saying the proposed price

undervalued the company and predicting it would be unlikely to get past regulatory concerns.

Lloyds TSB plans to offer 1.5 shares plus 260 pence in cash, valuing each Abbey share at 1,223 pence.

-- from staff and wire reports

Government refers $29B bid for Abbey National, Lloyds undeterred
Feb. 23, 2001
Lloyds scores a 7 per cent rise in profits
Feb. 16, 2001
Abbey National seeks shareholders' support ahead of Lloyds' bid decision
Feb. 14, 2001
Lloyds TSB makes informal offer of $29 billion for Abbey National
Jan. 31, 2001

Abbey National
Bank of Scotland
Lloyds TSB

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