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November 3, 2008

Lloyds TSB / HBOS outlines £17bn fund raising

by Gill Montia

Story link: Lloyds TSB / HBOS outlines £17bn fund raising

Lloyds TSB and troubled mortgage lender HBOS have announced further details of their proposed merger.

To fund the acquisition, Lloyds TSB will raise £4.5 billion of capital via an issue of 2.6 million new shares to existing shareholders, at a discounted price of 173.3p.

At the same time, HBOS will raise £11.5 billion, £8.5 billion of which will come from a share issue, £3 billion of which will take the form of preference shares.

The Government will buy up any unsold stock plus £1 billion of Lloyds TSB preference shares and could therefore hold up to a 43% stake in the merged entity.

A combined Lloyds TSB / HBOS would be the UK’s largest retail bank, with almost 30% of the mortgage market and holding around £300 billion in customer deposits.

Lloyds TSB estimates that it could make savings of £1.5 billion through a successful merger.

Separately, it emerged over the weekend that an international finance company has expressed an interest in acquiring HBOS.

Scottish businessman and former HBOS executive, Jim Spowart, has reported that the company in question has made an approach to the Treasury to ascertain the attitude of ministers to any counter bid.

 

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