Midshires wavers as board considers pounds 780m Halifax bid

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THE BOARD of Birmingham Midshires met last night to give "preliminary consideration" to Halifax's attempt to prise the building society away from the grip of the Royal Bank of Scotland. The Midshires directors are expected to decide whether to break a legal agreement signed by both themselves and the Royal Bank of Scotland last August.

Under terms of that agreement, Midshires is not allowed to hold formal talks, or exchange information with, a third party. The most likely outcome is that Midshires will ask Royal Bank to release it from parts of the agreement, rather than break the contract, a source close to the discussions said.

It is believed that, if Midshires broke the contract, it could be hit by a penalty fee.

A Midshires spokesperson said the board would not immediately decide whether to recommend the Halifax bid to its members over the Royal Bank bid.

The Royal Bank agreed in August to pay a price of between pounds 605m and pounds 630m for Birmingham Midshires. On Monday evening Halifax launched a pounds 780m rival bid, saying that Royal Bank "significantly undervalued" the building society. The Royal Bank has said it will not raise its offer "under any circumstances". Halifax said that because of the agreement between the Royal Bank and Birmingham Midshires, its offer had necessarily been based on publicly available information.

David Gilchrist, Halifax's group secretary, hinted his company could walk away from the deal if it could not talk through details of the offer with Midshires. He said: "They [Midshires] would have to be released from this sort of restriction for this to proceed in any sensible way".

However, the Royal Bank gave the impression of standing firm on the legal agreement between itself and Midshires. In a statement released yesterday morning, the bank said it had a "binding agreement" with Midshires. It added: "Royal Bank Group and Birmingham Midshires continue to work together towards submitting the Royal Bank Group's proposals to Birmingham Midshires' members as soon as possible".