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Lloyds TSB to Buy HBOS for $22 Billion as Credit Crisis Widens

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Jon Menon and Ben Livesey
Thursday, Sept 18, 2008

Lloyds TSB Group Plc agreed to buy HBOS Plc for about 12.2 billion pounds ($22.2 billion) as the government backed a deal to keep Britain’s largest mortgage lender from succumbing to the worsening global credit crisis.

Lloyds TSB rose 2.4 percent today in London trading after the U.K.’s biggest provider of checking accounts said in a statement it will buy HBOS for 232 pence a share in stock, 58 percent more than yesterday’s closing price. Lloyds TSB Chief Executive Officer Eric Daniels, who will run the combined bank, told reporters today it will sell assets to help fund the deal.

HBOS lost almost half its market value this week on concern the company would face a shortage of funds to back its loans, the same predicament that led to last year’s government bailout of Northern Rock Plc. Lloyds TSB and HBOS rushed to complete a deal just days after the U.S. subprime crash forced Lehman Brothers Holdings Inc. into bankruptcy and led to the government takeover of American International Group Inc., the biggest U.S. insurer.

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“The alternative was very bleak indeed,” U.K. Chancellor of the Exchequer Alistair Darling told the BBC’s Radio 4 in an interview today. “It was a necessity. We were ready to facilitate this merger.”

Lloyds TSB, initially down as much as 28.75 pence, rose 3.25 pence to 283 pence at 10:10 a.m. in London, valuing the company at 16.4 billion pounds. HBOS shares surged 40 percent to 206.5 pence, giving the company a market of 10.8 billion pounds.

HBOS shareholders will receive 0.83 Lloyds TSB shares for every HBOS share they own, the statement said. The companies said they plan to complete the deal by early next year.

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This article was posted: Thursday, September 18, 2008 at 3:45 am

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