Abbey National poised to takeover Scottish Provident

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The Independent Online

Abbey National, the high street bank, is expected to announce later this week that it has struck a deal to buy Scottish Provident the Edinburgh-based mutual insurance group for £2bn. The deal will lead to 300,000 Scottish Provident policyholders being in line for average windfalls of more than £6,500 apiece.

Abbey National, the high street bank, is expected to announce later this week that it has struck a deal to buy Scottish Provident the Edinburgh-based mutual insurance group for £2bn. The deal will lead to 300,000 Scottish Provident policyholders being in line for average windfalls of more than £6,500 apiece.

Abbey which has been seen as front-runner in the bidding for some time is understood to have won over David Woods, the Scottish Provident chief executive with guarantees to maintain Scottish Provident as a separate brand with prime responsibility for income protection, alongside Glasgow-based Scottish Mutual, Abbey's pensions and life insurance arm.

Most of the savings that will flow from the deal will come from combining computer systems rather than cutting staff, although some overlap between the businesses is inevitable.

Mr Woods is also expected to emerge with a senior board position at Abbey following the deal.

The two other bidders to have made the final three, namely Royal London and Liverpool Victoria, both mutually owned, are understood to have come very close on price. But they were unable to match Abbey in terms of promises for employment growth and investment in the Scottish Provident business.

One issue which remains to be resolved, but which is not seen as a deal-breaker, is the fate of Scottish Provident's 38 per cent stake in Aberdeen Asset Management, the fast-growing fund management group.

There has been speculation that Aberdeen would fall victim to a takeover as a result of the Provident sale.

Abbey is keen to get its hands on the £10.5bn in funds that Aberdeen manages on Scottish Provident's behalf but is unlikely to want to find the £700m extra needed to mount a credible bid for Aberdeen.

Presenting the deal, Ian Harley, Abbey chief executive is likely to stress that acquiring Scottish Provident with its 30 per cent share of the income protection market gives Abbey a strong position in a fast growing market area, and will go a long way towards meeting the group target of 65 per cent of its income from non-traditional businesses by 2003.

Mr Harley has been under pressure to prove that Abbey has not lost the deal-making touch that it had under his predecessor Peter Birch.

However, it remains to be seen whether the acquisition will go down well enough in the City to lift Abbey's share price and remove the threat of takeover which has been looming over the bank for some time. The deal is nevertheless expected to mark the end of Abbey National's immediate ambitions to acquire in the life insurance and pensions area. The bank has expressed interest in looking at Equitable Life and less plausibility Friends Provident but is now thought unlikely to pursue either.

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