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Merger mania brings no guarantee of windfall

Thousands of people who opened new accounts with National & Provincial Building Society this week may not receive the windfall they hoped for, even if the deal with Abbey National goes through. On Monday Abbey said it wanted to buy N&P, creating another bout of merger mania.

Yesterday morning N&P decided to suspend new savings account openings after thousands of accounts had been opened, with millions of pounds deposited.

Most of the new customers were assumed to be anticipating a cash payout similar to the Cheltenham & Gloucester deal. C&G is being bought by Lloyds Bank for £1.8bn.

N&P's decision reflects the speculation surrounding the society following Abbey's announcement. The building society intends to have available next week new deposit accounts with terms that match the existing share accounts. It said existing savings account members could continue to operate accounts normally. Other society business remains unaffected.

People who did open new accounts face huge uncertainty together with N&P's 1.7 million existing members. N&P will not indicate whether it will agree to the Abbey approach until after a crucial meeting between the two boards on Monday.

And even if the deal does go through, building society legislation requires a cut-off date after which no new account- holders can receive a cash payout. There is no indication last week's "openers" would fall within this net. The legislation was designed to prevent exactly this kind of speculative account-opening, with punters hoping to cash in on possible future mergers and acquisitions.

Another uncertainty is timing. If N&P opts to sell to Abbey, the process could take a year. If it chooses to merge with another society and convert to bank status, that could take two to three years. So speculators could wait a long time for their windfall.

Intense competition has led to "merger mania" in the building society sector, with everyone talking to everyone else. Woolwich is seen by analysts as one strong society that might want to merge with another and convert to bank status.