Alliance flotation means pounds 2.5bn windfall

More than three million members of Alliance & Leicester, Britain's fourth largest building society, will receive a shares windfall worth at least pounds 2.5bn, following the society's announcement yesterday that it is to become a bank.

Each of the society's 520,000 borrowers and its 2.5 million share account members will receive shares worth about pounds 800, in return for backing the flotation.

Alliance & Leicester's decision brings to an end a two-year de-mutualisation frenzy which has seen millions of savers, and tens of thousands of speculators, gain from a shares and cash bonanza worth up to pounds 17bn.

Any investor who placed pounds 100 in each of the Halifax, Cheltenham & Gloucester, National & Provincial, Woolwich and Alliance & Leicester before they raised minimum limits on new accounts last summer will have received at least pounds 3,000 in cash and shares. Leeds Permanent members gain by their merger with the Halifax.

In the case of Alliance & Leicester, reports of its de- mutualisation, which first appeared in the Independent in September, eventually led it to raise its minimum limit to pounds 5,000 and then to close its doors to all new accounts earlier this month.

The society claimed yesterday that the number of "carpetbaggers", those who opened accounts solely in order to benefit from the shares windfall, was likely to be minimal.

Peter White, the society's group chief executive, said: "We will allow all our members a share in the society." He declined to give any details of how the shares distribution will take place, arguing that a number of legal and regulatory hurdles had to be overcome before a decision could be made.

To freeze out speculators, Alliance & Leicester has also retrospectively set 31 December 1995 as the cut-off date, after which new investors will not be able to benefit from its decision to float.

Alliance & Leicester said it would ballot its members before the end of the year. If the flotation is agreed, it would take place in March or April 1997, ahead of the Woolwich and Halifax building societies.

The decision to seek a listing on the Stock Exchange will catapult it into the FT-SE 100 list of top companies, with assets of more than pounds 22bn.

Among its assets are Girobank, bought in 1990, which operates through almost 20,000 Post Office outlets and pays Giro cheques to millions of social security claimants. Alliance & Leicester plans to significantly expand Girobank's activities, including a range of simple savings products.

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