Government Set to Takeover HBOS as Lloyds TSB Merger Flounders
' rel="nofollow">http://www.guardian.co.uk/.../feedarticle/7859786"] An announcement was expected before markets open on Monday, but details were still being fine-tuned, said the sources. Royal Bank of Scotland Group Plc may take over 15 billion pounds, HBOS about 10 billion, Barclays may seek over 7 billion and Lloyds TSB about 5 billion, according to industry sources and media reports. The banks are expected to try and sell shares to existing investors, backed by the government, which would buy the shares not taken by investors. That could result in the government becoming the biggest shareholder, and even a majority investor, in Royal Bank of Scotland and HBOS. The government could take seats on the boards of banks, a government source said on Saturday. The Financial Times newspaper said on Monday Royal Bank of Scotland was expected to place shares with the government at 65 pence a share, compared to a closing price on Friday of 71.7 pence. Royal Bank of Scotland's chief executive Fred Goodwin is widely expected to resign as part of the fund-raising. Earlier this year, Royal Bank of Scotland shareholders had said Goodwin would need to step down if the bank sought to raise more cash. Stephen Hester, chief executive for British Land, is seen taking over from Goodwin after joining the Royal Bank of Scotland board just 11 days ago. In addition to potentially taking ordinary shares, the government is expected to provide capital in return for preference shares, which could pay an annual dividend of about 10 percent but typically do not have voting rights. The Financial Times said Royal Bank of Scotland could also raise 5 billion pounds in preference shares, while HBOS may take around 3 billion. Lloyds, Royal Bank of Scotland, HBOS and Barclays all declined to comment.
The planned merger deal between Lloyds TSB and HBOS - at the government's urging - does not appear to have yet been sealed, with Lloyds TSB demanding, ahead of markets opening tomorrow, that the HBOS assets be revalued.
Under Financial Reporting Standards (Business Combinations) the assets of a subsidiary must be stated at "Fair Value" as at date of acquisition. It would appear that Lloyds are waiting to see how much HBOS receive in the £400bn bailout agreed by Gordon Brown PM last week. Most High street banks are expected £5bn each and this would have the effect of cutting HBOS losses and thus making them cheaper.
Meanwhile, Lloyds TSB wants the terms of its HBOS takeover renegotiated.
It wants to secure the buyout for a smaller fee, given that HBOS is being forced by the Government to raise as much as £12bn.
If an agreement is not reached, the takeover could collapse.
On top of the cash to be raised by HBOS, Mr Peston said RBS is likely to get in the region of £20bn and Lloyds TSB about £5bn.