Lloyds seeks to offload estate agent to ease reliance on state

Published on Tuesday 13 October 2009 21:24

LLOYDS Banking Group yesterday raised the "For Sale" sign on its loss-making estate agency business as it continued to flog assets in an effort to reduce its reliance on the taxpayer.

The bank, which is 43 per cent owned by the government, said it was in talks with LSL Property Services – owner of high street estate agency firms Your Move and Reeds Rains – to offload Halifax Estate Agencies (HEA). It did not disclose a potential price.

HEA, part of Lloyds since it took over HBOS, has 218 branches, including 93 franchises. The deal would boost the number of branches owned by LSL by nearly a third. Currently, the group has 357 estate agents offices, including 74 franchises.

The property firm did not say how it would finance any takeover. As of the end of June, LSL had net debt of 43 million and its bankers included Lloyds and Barclays.

In 2008, LSL generated a turnover of 161.7m and made a pre-tax loss of 6.2m.

In comparison, HEA, which was founded by HBOS in 1986, had a turnover of 54.3m but made a hefty operating loss of 57.9m.

Lloyds is looking to raise an estimated 15 billion from asset sales, as well as an 11bn rights issue, in an effort to escape the onerous terms of the government's toxic asset insurance scheme.

It is unlikely that the sale of HEA will put much of a dent in the group's need for cash.

The bank, which last year received a 17bn government bail-out, is thought to be desperate to raise cash to bolster its balance sheet and regain its independence. In August, it sold the former HBOS asset management division, Insight, to New York Bank Mellon for 235m.

Avoiding the government's asset protection scheme (APS) would also maintain the taxpayer's stake in the business at about 43 per cent.

Yesterday, it emerged that Lloyds may have to pay more than 1bn to avoid the APS. It is thought the Treasury will still demand a break fee if it succeeds in avoiding the insurance scheme.

Under the current terms of its entry, it will pay 15.6bn in new shares as a fee for the APS, taking the government's stake to 62 per cent.

If it joins the scheme, the bank will also run foul of the European Competition Commissioner, Neelie Kroes. The European Commission is in talks with the Treasury and the bank over the market-dominating size of its retail branch network and has called for it to be cut down.

Earlier this year, Lloyds reversed a decision to close its 164-strong Cheltenham & Gloucester branch network.

LSL was formed after the management buy-out of Your Move, led by group chief executive Simon Embley, from Norwich Union in July 2004.

As well as Your Move, which has some 300 branches, LSL has Reeds Rains in estate agency and the surveyors Chancellors and Barnwoods.

Lloyds said it would provide an update on the sale process "in due course".

LSL's commercial director, Miles Shipside, formerly worked for HEA.

Lloyds shares slipped 2 per cent to close at 89.72p.