Lloyds TSB will pay £12.2 billion for HBOS.

Lloyds TSB and HBOS have agreed to the terms of a takeover – with Lloyds TSB paying £12.2 billion for HBOS, a deal backed by the UK government amid fears of financial breakdown.

Under the terms of the acquisition, HBOS Shareholders will receive 0.83 Lloyds TSB Shares for every 1 HBOS Share. Existing Lloyds TSB Shareholders will own approximately 56% of the issued share capital of Lloyds TSB as enlarged by the acquisition and existing HBOS Shareholders approximately 44%.

The deal will create a dominant mortgage and savings provider, strengthening Lloyds TSB’s ability to serve UK customers in difficult markets. The combined group will benefit from a portfolio of strong and trusted brands including Bank of Scotland, Halifax, C&G and Scottish Widows.

New lending by the combined bank for both UK mortgages and SMEs will continue at least at current levels and will expand as market conditions improve. In addition, Lloyds TSB intends to increase the range of products on offer on competitive terms to First Time Buyers (“FTBs”), building on the current shared equity and shared ownership offers.

The new bank will continue to use The Mound, HBOS’s headquarters in Scotland, and intends to focus on keeping jobs there, amid rumours of a potential 40,000 job cuts across the new company. 

The deal is expected to boost annual earnings by over £1bn a year by 2011 through cost savings and boost its earnings per share by over 20% a year.
Lloyds TSB’s Eric Daniels will remain as Chief Executive of the enlarged group and Sir Victor Blank will remain Chairman.

Commenting on the acquisition, Sir Victor Blank, Chairman of Lloyds TSB said: “This will be a unique opportunity to accelerate and extend our strategy and create the UK’s leading financial services group. Lloyds TSB/HBOS’s outstanding franchise will enable it to service more of its customers’ needs with the balance sheet strength to prosper in challenging markets. This is a good deal for customers and shareholders.”

Dennis Stevenson, Chairman of HBOS, said: “This is the right transaction for HBOS and its shareholders. Against the backdrop of the very high levels of volatility our industry is experiencing, the combined group will be one of the strongest players in the UK financial services sector. In addition, the combined group will have excellent brands and a very powerful franchise. We are recommending our shareholders vote for this transaction.”

For more information on the acquisition, visit: www.lloydstsb.com