Barclays secures Woolwich for £5.3bn

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The Independent Online

Barclays yesterday wrapped up the £5.3bn takeover of Woolwich, the building society turned bank, and set its sights on a further deal to beef up its presence in the long-term savings market.

Barclays yesterday wrapped up the £5.3bn takeover of Woolwich, the building society turned bank, and set its sights on a further deal to beef up its presence in the long-term savings market.

Matt Barrett, Barclays chief executive, said the country's fourth-largest financial group still needed to expand its clout in long-term savings: " I am not satisfied that we are doing enough in that business."

The Woolwich deal will lead to the closure of about 100 branches out of a combined network of 2,100. A total of 1,000 jobs will be cut from a combined payroll of 76,400. The Woolwich brand will be retained "in perpetuity", Mr Barrett pledged.

The Barclays chief executive, mindful of the outcry that followed his decision to close hundreds of rural branches this year, added: "These branch combinations will be done paying the utmost attention to ensuring that customers will not be inconvenienced."

While the closures will affect both Barclays and Woolwich, the majority will fall across the South-east, where Woolwich has most of its 412 outlets.

The deal, the terms of which were announced mid-week when the two banks admitted talks, met with a muted response in the City amid concern about the hefty price tag, three times book value, that was agreed. "The City appears to be a wee bit spooked about a business that we regard as intrinsically profitable," Mr Barrett said. "The fit is there for all to see. It's not overlap, it's fit."

John Stewart, the Woolwich chief executive, who will assume responsibility for Barclays' retail business and become group deputy chief executive, said: "Woolwich was the prettiest girl in town. We could have a choice and we chose Barclays."

Barclays will pay 164p cash plus 0.1175 share for each Woolwich share, valuing the business at 350.5p a share, a premium of about 30 per cent to the Woolwich close before talks were confirmed.

Woolwich shareholders can apply to vary the split of cash and paper they receive. But, as Barclays will not alter the deal's framework, there is no guarantee Woolwich shareholders' applications will be met in full.

Mr Barrett said the transaction would enhance earnings from 2001, with annual savings and revenue benefits of £240m. The takeover will trigger one-off restructuring costs of £150m.

The deal doubles Barclays' share of the mortgage market to 10 per cent and addresses a strategic weakness that had been troubling Mr Barrett.

Sarah Horder, Teather & Greenwood analyst, said: "When it comes to the product offering, the fit is pretty good. The price is quite full, but equally it will deter counterbidders."

Don Cruickshank, the chairman of the London Stock Exchange, who recently headed an official inquiry into the banking industry, questioned the growing concentration in the current account market. These fears were dismissed by analysts.

John Varley, formerly Barclays head of retail services, will become director of integration and oversee the businesses' combination.

Shares in Barclays dipped 11p to 1,570p, while Woolwich advanced 4p to 341.5p.

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