Melanie Bien: Abbey shareholders sleep easy about the Spanish acquisition

As you browse lazily through the Sunday papers, you may be feeling just a little bit guilty - if you happen to be one of Abbey's 1.8 million shareholders. That's because a 399-page monster of a document is demanding your attention.

As you browse lazily through the Sunday papers, you may be feeling just a little bit guilty - if you happen to be one of Abbey's 1.8 million shareholders. That's because a 399-page monster of a document is demanding your attention.

This scheme document was sent out last Friday and sets out details of the proposed acquisition by Spanish bank Santander Central Hispano. Thankfully, a more manageable summary covers how the bid affects shareholders and how you can vote. So you may not have to write off your weekend after all.

HBOS's decision to pull out of the running for Abbey last Wednesday means it is almost certain that Banco Santander will be successful in its bid. The Abbey board is recommending that investors vote in favour of the proposal.

A takeover by a British bank would have had many practical advantages for Abbey shareholders because the new shares would have been listed on the London Stock Exchange and quoted in sterling rather than euros. But Santander has paid attention to investor concerns and, as well as a Spanish listing, is seeking a secondary placing on the London market in the first half of next year.

Under the terms of the deal, for every Abbey share you own, you will receive one in Santander plus a cash dividend of 31 pence per share. These dividends will be available in sterling.

Santander is also offering free share dealing, available to UK-resident Abbey investors who own fewer than 2,000 shares on the day the acquisition is completed. There is an option for those people to sell their holding without charge and receive the proceeds in sterling. You have to offload all your shares to qualify for this - no part sales are allowed - and you have six months to do so. If you are interested, ask for a dealing-facility information pack when you return your proxy cards for the extraordinary general meeting (EGM) on 14 October at the Wembley Conference Centre.

If Abbey investors approve the acquisition, it should be completed by 12 November. Share dealing will start on the Bolsas de Valores, the Spanish exchange, on 16 November.

However, problems remain. While share dividends will be paid in sterling with no foreign exchange commission, they will be subject to Spanish withholding tax at a rate of 15 per cent on the gross amount. Santander and Abbey are looking at ways of mitigating this but so far no solution has been found.

You won't get a certificate for your Santander shares, either, as Spanish firms don't issue these to individuals. Instead, you'll receive the shares in the form of Crest depository interests (CDIs), which will be held by a corporate nominee on your behalf.

And if you sell your new Santander shares, you will have to file a Spanish tax return. For those who already have to struggle with the self-assessment system in the UK, this will be an extra hassle.

But the main question Abbey shareholders need to consider is, will Santander bring in the lower charges and better service that it promises? Questions have been raised over whether the bank is more efficient than British rivals and whether customers will get a cheaper deal.

In terms of corporate efficiency and profitability, Santander holds up fairly well compared with UK banks. But banking in Spain is rather different. For example, overdraft charges are much lower, with the Spanish horrified at the rates imposed by British high-street banks on customers.

But Santander, in line with many other Spanish banks, charges customers a nominal monthly fee for having an account and for transactions - anathema to UK current account holders.

In any case, there's no need to panic about what might happen. It looks as though Santander will be successful in its bid for Abbey, and if this doesn't turn out to be as advantageous as the Spaniards are promising, shareholders can simply sell up, take their money and run.

Abbey customers should continue to shop around for the best-value financial product: if it happens to be on offer elsewhere, I suggest you vote with your feet.

Abbey shareholders can call the helpline if they have any questions on 0870 532 9430 (Monday to Friday 8.30am to 8pm and Saturday 9am to 1pm).

m.bien@independent.co.uk

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