大象传媒

Done deal

• Robert Peston
• 14 Jul 08, 12:35 PM

UPDATE: The deal is now done. The board has agreed to be taken over by S, at a price of one Santander share for every three A&L shares. A&L's acting chairman Roy Brown says his board couldn't turn the offer down because of what he called "the significant external risks presented by the deterioration in economic conditions and the continuing turbulence in the financial markets".

But one of A&L's larger investors is hopeful that Santander is not the only bank left in the world with steel cojones. Its head of UK equities, David Cumming, is trying to encourage a counter-bid from another financial institution, to push up the take-out price.

He says: "This is a gorgeous deal for Banco Santander. They are acquiring Alliance & Leicester on giveaway terms.

"Given the potential integration benefits other banks must surely be reviewing their options. I would be amazed if no one else counters with a higher offer in the next few months."

We'll see. A&L has been vulnerable to a takeover for months, and no one but Santander has been prepared to put a firm offer on the table.

Which is not a surprise? As I wrote here last night (see "It's jobs, stupid"), most banks are trying to improve their capital ratios - so it takes a lot of nerve and a good deal of spare capital to take on A&L's 拢40bn plus mortgage book, plus the rest of its balance sheet.

• Permalink
• Comments (0)

Santander bids for A&L

• Robert Peston
• 14 Jul 08, 08:46 AM

I can exclusively reveal that it's Santander which has made a takeover approach to Alliance & Leicester. If successful the deal would see A&L merged with , which is also owned by the giant Spanish bank.

The takeover - if successful - would be a great relief to the City watchdog, the , because it believes big banks are more robust in these uncertain times.

However A&L has been a source of important competition in the UK's relatively concentrated banking market. So there will be some concern that the disappearance of A&L as an independent entity would leave too much power in the hands of the big banks.

UPDATE 09:40AM:

When A&L announced last week that it had recruited a new chairman, Alan Gillespie, I wondered if it would be a short-lived job, since Santander has been sniffing around this bank for some months.

In fact, Gillespie doesn't turn up till 8 September - which may be a shame, since he's a former Goldman Sachs banker and his advice might be valuable. But, as a clever ex-Goldman partner, I wonder whether he negotiated any kind of compensation in the event that he was made redundant before he even arrived.

The market seems to think the takeover will go through, although the hedge funds are hopeful that A&L - whose share price has soared almost 50% this morning - may be able to squeeze a couple of extra pennies from the Spanish.

The offer is being pitched at 299p per share, valuing the bank at 拢1.26bn - which is 37% more than on Friday but probably a snip for a business with a decent name that claims it has a relatively conservative lending portfolio (though some analysts and competitors argue that A&L rather overstates it claim to be uber prudent). Santander has done its investigations of A&L's balance sheet - its due diligence - and likes what it sees.

Don't forget that this was a business valued at more than 拢5bn in 2006 - which was a crazy bubble-market valuation but is not completely without relevance.

A&L says that shareholders should perhaps view the offer as worth 317p a share, since it is planning to pay them an interim dividend of 18p. That's within sight of the current market price of 326p - up 49% on the day, and warming the cockles of some long-suffering A&L shareholders.

The wider story however is that one bank at least, Santander, doesn't believe the UK housing market is a write-off. It wouldn't be taking on A&L's massive mortgage liabilities if it didn't see serious profit in financing the purchase of our homes.

• Permalink
• Comments (0)