Vote on Lloyds deal needs 50% support of all its investors

Published on Monday 8 December 2008 08:41

THE fate of the Halifax Bank of Scotland merger with Lloyds TSB could be decided by the bank's two million small shareholders, it has emerged.

The deal is to be voted on by HBOS shareholders at a meeting in Birmingham on Friday, and while it is expected to get the approval of major institutional shareholders, who own 80 per cent of the company, there is thought to be less support from small investors.

The board should have no problem getting the required backing of people holding 75 per cent of the bank's shares.

A rule introduced to protect small shareholders, however, means that the deal must also get the backing of 50 per cent of all the company's shareholders.

Sir Peter Burt, the Bank of Scotland chief executive who oversaw the merger with Halifax, has voted against the merger and admitted:

"It is not outwith the bounds of possibility that the board may not get the support they need."

The proposed deal, which is expected to lead to major job losses in Edinburgh, will face its first hurdle of the week today at a London tribunal, as the Merger Action Group, led by local business figures, seeks to block the deal, claiming that Lord Mandelson, the Business Secretary, broke the law in approving the takeover without putting it before the Competition Commission.

The group have received the backing of Edinburgh's most famous son, Sir Sean Connery.

"I never saw anything that got bigger get better," he said.

Edinburgh architect Malcolm Fraser, a spokesman for the Merger Action Group, said

: "Sir Sean's support adds to the groundswell of opinion that the Government is not above the law and should not have pushed through this merger without reference to the proper legal framework."

If the decision goes against the group, it is expected they will move to the Court of Session in Edinburgh with an appeal.

Lord Mandelson has also come under fire for his attempts to block the legal action. His lawyers sent the MAG a letter indicating that they would not pursue legal costs if the challenge was dropped on Friday, a move which has been described as "bully-boy tactics".

A spokesman for HBOS said the legal action was "unnecessary and unhelpful".