Halifax flotation to cost pounds 400m

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The Independent Online
The bill for merging Halifax Building Society with Leeds Permanent and next year's planned pounds 11bn stock market flotation will total more than pounds 400m.

City lawyers, bankers and brokers will share bumper fees with Halifax estimating the bill for flotation and the accompanying conversion to being a bank at pounds 153m.

The remaining pounds 260m of the bill is restructuring costs associated with the merger with Leeds. The costs break down as pounds 208.9m for reorganising, restructuring and integrating the two business, and pounds 51.5m for the loss on the disposal of fixed assets, mainly property.

Halifax has already announced 1,200 job losses as a result of merging the two head offices. It is also closing down branches as there was considerable overlap between the two societies on the high street.

The society will not reveal the precise details of the share handouts to its 9 million members until early next month when its weighty transfer document about the flotation will be sent out. The wording is being finalised with the Building Societies Commission, the industry regulator.

The document will confirm that the share bonus will take the form of a flat distribution and an additional variable allocation of shares. The number of shares allocated will be calculated based on the balance in each member's account in November 1994 - when the flotation was first announced - and on the day of the special general meeting next February.

Halifax also yesterday announced results for the first nine months of this year, showing an underlying 5.9 per cent rise in pre-tax profits to pounds 1.08bn before the exceptional costs for the Leeds merger and partly for the flotation.

The society took a 9 per cent share of net mortgage business in the UK in the nine months. This compares with the 7 per cent share in the first half, which was depressed by the society's decision to stay away from the highly competitive remortgage market.

But this is still well below its 20 per cent share of outstanding mortgage business.

While the cost of the conversion is still only an estimate, the Halifax has decided to take a pounds 69m charge during the nine-month period ending 31 October 1996.

This covers the costs to be incurred up to the special general meeting at the Sheffield Arena in February. The date of the meeting, at which members will vote on the conversion plan, has yet to be announced.

Roughly half of the conversion costs are due to communication, according to a Halifax spokesman. This includes mail shots to the society's members, producing and distributing the 150-page transfer document and a new advertising campaign.

The remainder of the costs will include fees to Deutsche Morgan Grenfell, the investment bank that is managing the flotation. One analyst estimated that Deutsche would expect to rake in around pounds 45m in fees. Lawyers could charge pounds 30m while stockbrokers will also expect to receive fees of approximately pounds 15m.

The only other converting building society to admit the cost is Alliance & Leicester which put its bill at pounds 58m, pounds 10m of which is due to postage costs. Halifax's stock market value after flotation is estimated to be 3.7 times greater than Alliance & Leicester's.