11th hour talks over rival bid for HBOS

The possibility of an alternative deal being forced through came to light after it emerged that Jim Murphy, the Scottish Secretary, has been in discussions with Jim Spowart, the founder of Intelligent Finance.

The Edinburgh-based HBOS is the subject of a proposed 12bn merger with Lloyds TSB, despite the Office of Fair Trading recommending that the merger should be referred to the Competition Commission.

Spowart contacted the Secretary of State for Scotland earlier this week, to discuss the possibility of a group putting together a rival bid.

The two men were in intensive talks yesterday. Spowart told the BBC: "This is a genuine, genuine interest.

"I can't emphasise that enough at this stage, and just let's hope for Scotland this is another alternative that we're able to look at."

He also suggested the rival deal could keep more jobs and decision-making functions in Scotland.

Spowart said: "What would attract myself to this would be that we'd keep the decision making in Scotland, or at least it would appear to keep the decision making in Scotland.

"It would keep the bank more or less intact. I can't guarantee the situation on jobs, but I don't think there would be a job cull at the same level as what is currently estimated or anticipated by Lloyds TSB."

An estimated 17,000 HBOS jobs are based in Scotland and it is feared thousands will be lost if the merger with Lloyds TSB goes through.

Murphy confirmed he had had talks with Spowart and said: "I have spoken to the Treasury and if there is a second serious bid then the Treasury would be happy to talk to them."

The possibility of a second deal emerged the day after the Government gave Lloyds TSB's planned merger with HBOS the green light after overruling competition concerns raised by the Office of Fair Trading.

The Business Secretary, Peter Mandelson, said the public interest of "preserving the stability of the financial system" outweighed any potential anti-competitive effects.

Lord Mandelson said: "I am satisfied that, on balance, the public interest is best served by allowing this merger to proceed without a reference to the Competition Commission."

The 158-page OFT report raised concerns over personal current accounts, mortgages and banking services for small and medium-size businesses. The report represented the first time that a government body has cast doubt on the wisdom of the move.

Last week, Scottish First Minister, Alex Salmond, met Lloyds TSB bosses in London to lobby for Scottish interests should the merger go through.

A spokesman for Salmond said: "If any new bid or management team emerges for HBOS, the First Minister will approach that in exactly the same way he approached the Lloyds TSB bid, which is making the positive case for Scotland and making sure that those involved see the value of retaining jobs and decision-making in Scotland. Any bid has to be judged against what is in the best interests of Scotland in terms of jobs, decision-making and competition."

Scottish Liberal Democrat leader, Tavish Scott, discussed the proposed merger of Lloyds TSB and HBOS with Murphy at a meeting earlier this week. He said: "The UK Government must give a fair wind to any other interested party providing a credible financial alternative that will keep competition in the banking market place."

But SNP MSP Alex Neil, a member of Holyrood's Finance Committee, attacked the UK Government's position on HBOS calling it "totally incoherent".

"On the one hand, Peter Mandelson is going pell mell for the Lloyds TSB takeover, and completely disregarding the dangers flagged up in the OFT report – including to banking services for small businesses in Scotland," he said. On the other hand, Jim Murphy is publicising a possible alternative bid.

"What is abundantly clear is that there must be a pause for reflection now so that the best interests of Scotland can be properly evaluated, and all options considered – including HBOS remaining an independent bank."