Brown says Lloyds TSB/HBOS deal the "right action"
Brown says Lloyds TSB/HBOS deal the "right action"
Thursday 18th September 2008
Gordon Brown has admitted that Lloyds TSB's acquisition of HBOS is "necessary" for the stability of the UK economy.The prime minister was notified of the £12 billion deal, which was confirmed today, at the beginning of the week.
The government has since pledged to legislate against competition and regulatory obstacles in the way of a purchase that creates Britain's first-ever 'super bank'.
"We're now in a better position because things are more stable," Mr Brown said on Thursday.
"We are cleaning up the financial system, continuing to take whatever action is necessary.
"The important thing is we have to take decisive, quick action. Our determination is to do everything to maintain stability of the system. I believe we took not only the right action but that by taking the actions we dealt with the stability of the financial system.
"First things first, and that is to maintain and ensure the stability of the system."
After a day of speculation, Lloyds TSB and HBOS today confirmed they would link up to form a lender covering around a third of the UK mortgage market.
HBOS share price had come under severe pressure in recent days over fears about its exposure to the collapsing UK property market.
As speculation grew, the bank found its borrowing costs rose and the fear it could be running at a loss.
Under the terms of the deal, HBOS Shareholders will receive 0.83 Lloyds TSB Shares for every one HBOS Share - valuing HBOS at £12.2 billion.
This is the equivilant of 232p a share - compared to HBOS's closing price of 147.10.
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, added: "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."
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