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Lloyds TSB HBOS merger
EGM. Resolutions passed
Latest News 19th November 2008 14.52 EGM All resolutions passed; Acquisition of HBOS, placing and open offer and capitalisation issue
13th October 2008 The Lloyds/HBOS merger terms have been amended to 0.605 Lloyds Shares for each HBOS share
The Basic FactsOn the 18th September 2008 it was announced that Lloyds and HBOS (Halifax Plc and Bank of Scotland Plc) had reached agreement on the terms of a recommended acquisition by Lloyds of HBOS. Note 1.documentUnder the terms of the acquisition HBOS shareholders will receive 0.83 Lloyds TSB shares for every 1 HBOS share. (We think this has subsequently been amended to 0.833 but are awaiting clarification.) 14.37 GMT+1 The terms were adjusted due to the recent fund raising and are now 0.833.
The recommended (by both boards) acquisition will be implemented by means of a Scheme of Arrangement under sections 895 to 899 of the Companies Act 2006.
Further Points.The UK government has decided to waive anti-trust restrictions that allows the takeover to even be considered.It is required that a majority of Lloyds TSB shareholders and 75% of HBOS shareholders to approve the deal.
What it Means.Lloyds TSB are taking over HBOS by way of an ALL SHARE offer. Contrary to some beliefs there is no cash involved. According to the official announcement the offer valued HBOS at £12.2 billion. This was based on the then (17th September 2008) closing price of Lloyds of 279.75 pence per share.
It is wrong to assume that this closing price can be used to value the HBOS shares now.
The theoretical acquisition price of HBOS is 0.833 times the current price of Lloyds TSB shares. And of course Lloyds share price as is now around 272p but fluctuates continuously. This would make the HBOS "value" around 226p.
You will note that the current market price of HBOS is about 178p
The bulk of the difference is due to the possibility or risk that the deal doesn't go through or that the terms might be renegotiated. Of course part of the difference is due to the time factor before you would receive the merger value.
What Happens Next?(To be updated in due course.)
There will be an EGM where shareholders will have the opportunity to vote for and against the merger. The Scheme of Arrangement to implement the deal will go to Court to be sanctioned. The new merged company will be listed on the Stock Exchange in place of the two old listings.
ConclusionWe cannot advise on the merits of buying or selling either of these shares but the investment decision should be based on the longer term merits of the merger against the shorter term risk of the UK banking sector.
1.The full acquisition document in PDF form is available at http://www.investorrelations.lloydstsb.com/media/pdf_irmc/ir/2008/2008Sept18d_LTSB_Acquires_HBOS.pdf