A&L shares rise on £6bn bid approach from French

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The Independent Online

Crédit Agricole, France's biggest bank, revealed yesterday that it is considering a £6bn bid for the British mortgage bank Alliance & Leicester.

The news spurred A&L shares 28p higher to 1143p, valuing the bank, the country's seventh largest, at £5.1bn.

Agricole, led by Georges Pauget, the chief executive, has made no secret of its desire to make a sizeable European acquisition and was first linked with a possible move for A&L in March.

The French bank, which stressed yesterday that this is but one option, declared that no proposal has yet been put to A&L and underlined that it may choose not to do so.

But no mention was made of an informal approach made to Richard Pym, A&L's chief executive, two months ago suggesting that the French would be prepared to pay 1,300p a share for A&L. Mr Pym thought that too mean and is understood to value the business at somewhere in excess of 1,500p a share.

Earlier this month, Agricole revealed that it had earmarked more than €5bn (£3.4bn) for overseas expansion, and confirmed its interest in a "large" acquisition in Europe. Agricole, which bought its domestic rival Crédit Lyonnais for €16bn last year, is controlled by 41 regional French banks. They have indicated that they may be able to find a further €10bn to fund an overseas purchase.

The French bank dwarfs the British lender. At about £33bn, its market value is more than six times A&L's. Agricole has 22 million customers, against A&L's 5.5 million. But still most banking experts think a price of £6bn would not add up for Agricole and may destroy value for its shareholders.

Ian Gordon, an analyst at Dresdner Kleinwort Wasserstein, said: "I find anything approaching 1,300p a share a serious stretch for Crédit Agricole and would appear to be value destructive."

As tough competition squeezes lending margins across Europe, its bigger banks are increasingly looking to bolster growth by swallowing foreign rivals and then wringing out cost savings.

Agricole, which was established 12 years ago to provide finance to farmers, had been expected to look to Italy to do a deal.

But a controversial €10.7bn move by another French bank, BNP Paribas, for Italy's Banca Nazionale del Lavoro in February made similar Franco-Italian acquisitions more politically contentious.

Banco Santander, the Spanish owner of Abbey, is the other potential predator most often linked to A&L. Emilio Botin, the chairman of Spain's biggest bank, until recently had been widely expected to turn his attention to A&L once his bank had digested Abbey, probably towards the end of the year.

Speculation resurfaced earlier this month that Mr Botin may be prepared to pay the 1,500p a share that Mr Pym is after. Then, as now, both Santander and A&L remain tight-lipped about such a takeover.

Mr Botin, too, has been open about his wish to increase Santander's presence in Britain, but has more recently steered leading shareholders towards the view that he would not be interested in another mortgage bank.

Instead, he is looking for other types of financial businesses to build a more diverse bank to take on the likes of Barclays and Royal Bank of Scotland on the high street.

He is, however, an opportunistic buyer. Last year, Santander spent $2.4bn (£1.3bn) on 19.8 per cent of the Pennsylvanian lender Sovereign Bancorp only days after senior managers had indicated to major investors that it held no interest in an American acquisition.

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