Lloyds seals deal for HBOS

In Hungary

Lloyds TSB sealed a £12.2 billion deal to buy HBOS, to create a dominant mortgage and savings provider, encouraged by the government amid fears turmoil in financial markets would claim another victim.

Lloyds will offer 0.83 of its shares for each HBOS share, valuing them at 232 pence apiece based on Wednesday’s closing price of 279.75p, a 58% premium over HBOS’s last price of 147.1p. The bank said it expects the deal to boost annual earnings by over £1 billion a year by 2011 through cost savings and boost its earnings per share by over 20% a year. Lloyds’ Eric Daniels will remain as chief executive of the enlarged group and Victor Blank will stay as chairman.

The UK government said it intends to smooth regulatory approval of the takeover -- despite the enlarged group having a 28% share of mortgages – “to ensure the stability of the UK financial system”. Lloyds said the combination will strengthen its ability to serve customers in current difficult markets. It follows a plunge in HBOS’s share price in the last six days amid fears about its funding position. (Reuters)

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