Lloyds TSB takeover of HBOS wins shareholders' backing

Published on Wednesday 19 November 2008 21:14

SHAREHOLDERS in Lloyds TSB yesterday voted overwhelmingly to take over competitor HBOS – leaving the Edinburgh bank's ballot the only obstacle to the controversial deal.

Despite the landslide vote at yesterday's extraordinary general meeting, concerns were raised that battered HBOS would drag down Lloyds TSB..

And shareholders directed their frustration about the banking sector collapse and economic decline at chairman, Sir Victor Blank. The Glasgow summit drew two groups of protesters – the Scottish Liberal Democrats, who want HBOS to remain independent, and the Unite union, who want job stability for employees of both banks.

However, the acquisition was backed by 95.98 per cent of shareholders – many of them institutions which may have stakes in both parties to the deal.

It was confirmed by the chairman that the Bank of Scotland brand would be retained, and that the registered office of the merged superbank – Lloyds Banking Group – would be based north of the Border.

Sir Victor was clearly at pains to point out the attractiveness of the deal for Lloyds' shareholders. He stressed that the banks had discussed such a move for many years, but competition law had prevented its completion.

He also continually insisted that Lloyds had taken a prudent approach to risk-management and was stronger than its banking peers as a result. He said the merged bank would take the "Lloyds approach" to business.

Nationalist MSP Alex Neil, who has been campaigning against the acquisition and was involved in an abandoned alternative bid, was disappointed by the vote.

He said: "I fully understand why Lloyds TSB shareholders would vote to acquire HBOS at such a snip, but the very fact they have voted so overwhelmingly in favour exposes the poor deal being offered to HBOS and their shareholders. HBOS has been handed to Lloyds TSB on a plate, despite it needing far less recapitalisation as an independent bank than Lloyds TSB itself."

But Shane O'Riordain, a spokesman for HBOS, said: "We welcome today's overwhelming vote in favour of our recommended merger.

"This is another very important milestone for our deal."

Lloyds TSB has 814,000 shareholders. It is thought about 700,000 are retail shareholders, 318 of whom braved the cold to attend yesterday's summit at the Scottish Exhibition and Conference Centre. A clear majority of more than 50 per cent of those shareholders who voted was required to pass the deal.

They backed seven other special resolutions, including plans to raise 5.5 billion through the issue of new and special preference shares to strengthen Lloyds' balance sheet.

There are concerns that up to 40,000 jobs may go as a result of the merger and the Office of Fair Trading has reported that competition is likely to be reduced in certain areas.

Sir Victor told the meeting: "We do appreciate that many of our employees may feel apprehensive at this time but, in creating what we believe will be the UK's leading financial services company, we believe the combination will generally provide enhanced opportunities for those who work in our group."

The chairman said it was "inevitable" that there would be some "rationalisation", but that employees would be consulted.

Eric Daniels, the chief executive, admitted the outlook ahead was "challenging" for the entire banking sector.

But he said the bank expected its "major branches", including Bank of Scotland, would continue to "play an important part" in the new institution.

Sir Victor added: "I think this is a great deal for both sets of shareholders with the opportunity to share in the upside of creating the UK's leading financial group." However, shareholder Tony Peterson said: "British banks seem to be in a state of absolute chaos at the moment.

"Can you understand that many of us present find it profoundly disturbing that this proposed deal was cooked up at a cocktail party in league with a Prime Minister prepared to set aside national law, competition law, designed for the common good? That most of us, in fact, think this deal stinks?"

Sir Victor dismissed his comments as "just untrue".

He said the deal was one which had been discussed "many years ago".

Sir Victor added: "The opportunity to buy HBOS in our view is a unique opportunity and one that to some extent became possible by circumstances – the lack of confidence in HBOS and the lack of liquidity in HBOS… I'm excited about the possibility of linking the two and I do believe it's the right thing to do."

He was later challenged by shareholder Professor William Gordon, who asked: "If Lloyds and HBOS have been discussing a merger for years, how did they expect to get around the competition laws before Gordon Brown intervened?"

Sir Victor replied: "The competition issue was the main obstacle to getting together earlier."

If the deal gets the go-ahead at the HBOS meeting next month, it will create a banking giant with around 145,000 staff and 3,000 branches across the UK.

Protesters keep up fight against takeover and job cuts

TWO sets of protesters armed with placards assembled outside the Lloyds TSB egm yesterday. Unite members, some of whom had travelled from London, were clad in T-shirts emblazoned "Secure Jobs > Secure Bank".

Wendy Dunsmore, a national officer for the union, said: "We are campaigning for no compulsory redundancies and no offshoring of jobs. We are calling on the company to meet with us as quickly as possible. We want shareholders' support in that."

Also campaigning outside the SECC were the Scottish Liberal Democrats, who have been lobbying to keep HBOS independent. The Scottish leader, Tavish Scott, is part of a cross-party campaign group that includes the independent MSP Margo MacDonald and Alex Neil, an SNP MSP.

Mr Scott told journalists that the party wanted to "maintain competition in the marketplace". He insisted there was still time to win the campaign. "It's not a done deal," he said. "I hope shareholders think very carefully about what they do here in Glasgow and in Birmingham in a few weeks (at the HBOS egm]."

Erikka Askeland - Heated debate and grilling the bosses can't dispel the chill

A CHILL wind blew through the cavernous exhibition hall No3 at the SECC in Glasgow yesterday, and not even the anger of Lloyds TSB shareholders could heat the place up.

Almost 400 turned out for the general meeting, to vote on Lloyds TSB's takeover of HBOS. The outcome was – perhaps surprisingly, considering some of the heated arguments aired against it – strongly in favour. But many were keen to have their say and the board put up with two and a half hours of grilling in the otherwise chilly surroundings, before share-holders were able to use hand-held electronic voting devices to let their views be known.

There were the gripes of shareholders being denied dividends while the government hogs the pay-outs – at least until the bank can pay off the taxpayer-owned 1 billion of preference shares.

Most of the shareholders at the SECC were not "fat cats"; rather pensioners, many reliant on share dividends to supplement their pensions. Clearly, they thought the deal on offer was a real dog.

Many believed Lloyds TSB has performed well – albeit its shares were trading at about 130p on the day, as opposed to 10. (The share price was falling even further while the meeting went on.) They tended to agree with the chairman and chief executive's line that Lloyds is alone among its peers in having been run prudently.

But why, they wondered, should we get tangled in the morass that is HBOS?

HBOS got a drubbing. It was a failed bank, terminally diseased, with an unhealthy dependency on wholesale funding in the region of 200 billion a year, according to the shareholders who got hold of the microphones.

The board shrugged off these barbs. It was made clear Lloyds planned to beat these problems out like dirt out of a rug – a process that would, of course, be helped along by the extra 17 billion that the combined group would raise once the deal was signed. In adversity comes opportunity, said the chairman.

On the stage, the urbane Sir Victor Blank was working hard for his money. He got 661,000 last year. Aside from chairing board meetings, events such as this are where he puts in the hard graft. The chief executive, Eric Daniels, was steely and deep-voiced. Only a few times did Sir Victor's and Daniels' patience with questions wear thin.

Most questions were well mannered, if lengthy.

Shane O'Riordain, the head of communications at HBOS, was watching carefully, and joked that he hoped the HBOS shareholders' vote on the deal in December would go as smoothly. Now that the Lloyds vote has come out so much in favour of the deal, it seems unlikely the HBOS vote will be that much different.

Sir Victor at least had the audience on his side when he pushed for a move to the voting. The shareholders had started to groan aloud when each new inquisitor brandished a speech. Once the vote was done, Sir Victor barely had time to thank them as the audience cleared out to retrieve warm coats.