Britain's Leading banks are this week set to step up their interest in the possibility of launching counter bids for Abbey National, the convalescing mortgage bank which has given the green light to an £8.2bn offer from Grupo Santander of Spain.
Santander itself is considering improving on its initial valuation, while ironically giving briefings detailing how many Abbey employees it would make redundant, how it would improve Abbey's out-of-date technical systems and how it would undercut the competition as part of a general move to improve Abbey's product range.
While only HBOS has formally said it was considering a bid for Abbey, it became clear over the weekend that the chief executives of HSBC, Lloyds TSB and Royal Bank of Scotland have ordered internal investigations into the prospect of joining the fray. "We'd be mad not to," one banking source said yesterday. "We're going to keep a watching brief on it because it's an interesting situation."
There are daunting regulatory hurdles to be overcome. It is only three years since the authorities prevented Lloyds from buying Abbey, on the grounds that it would have too big a share of the current account market. But bank sources who have studied the report into that aborted bid have noted that the authorities were open to receiving suitable commitments from Lloyds to improve Abbey's product offering. Lloyds shrank from doing so, as in that case it would have involved paying a significant rate of interest on current accounts.
But all the potential contenders are trying to gauge the likely reaction of the Competition Commission, and how willing it would be to cut a deal which would allow them to bid.
It emerged that non-taxpayers among Abbey's 1.7 million shareholders will receive 5p a share less than they might have expected from Santander. This is because the bid includes 31p cash which will be subject to 15 per cent Spanish withholding tax. Higher-rate taxpayers will be able to offset this against the tax they will be due to pay in this country, as the 31p has been structured as a dividend from Abbey. An Abbey spokeswoman said: "The optimal transaction structure was agreed based on a number of factors, only one of which was the taxation of the special dividend payments in the hands of Abbey's shareholders. The structure announced was the one that was most appropriate overall."Reuse content