HBOS drops out of Abbey National takeover

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The Independent Online

The prospect of a takeover battle for Abbey National receded today after Halifax-to-Bank of Scotland group HBOS walked away from a possible bid.

The prospect of a takeover battle for Abbey National receded today after Halifax-to-Bank of Scotland group HBOS walked away from a possible bid.

Analysts said the decision by HBOS made it unlikely a UK bidder would emerge to rival the £8.5 billion offer from Spain's Santander Central Hispano, which was unveiled in July and could now be approved by mid-November.

Today's development, which should prevent Abbey becoming embroiled in a lengthy competition inquiry, comes six weeks after HBOS announced it was considering a counter-bid for the UK's second biggest mortgage lender.

A combination of the two banks would have given HBOS 34% of the mortgage market and almost 25% of savings accounts. Unions also feared widescale job cuts as 70% of Abbey's 741 branches are within a quarter-of-a mile of an HBOS branch.

Despite claiming a strong case on competition issues, chief executive James Crosby said HBOS would be better off on its own.

He added: "From our point of view, Abbey was a one-off opportunity that we had to crawl over.

"We were as confident as we could be about the competition case. We did a lot of work and identified very substantial synergies that were in excess of those that the market was talking about."

Analysts had been expecting £770 million of HBOS savings, in contrast to Santander's £300 million - mainly from 3,000 job cuts and new IT systems.

HBOS said it had a strong case to challenge competition concerns with analysts expecting HBOS to argue that its ownership of Abbey would have put pressure on the Big Four clear banks to increase interest rates on current accounts.

The news of the withdrawal of HBOS from the race sparked a 6% fall in the Abbey National share price. HBOS saw its stock improve 4%.

Simon Maughan, an analyst at Dresdner Kleinwort Wasserstein, said the prospect of a drawn-out inquiry by competition chiefs coupled with a possible bidding war might have scared off HBOS.

Mr Maughan said: "I suspect that the price that was going to be demanded ... was more than HBOS was prepared to pay. It shows some pretty good discipline on their part."

Santander also confirmed today that it would look for savings of 450 million euros (£300 million) in a move that would result in the 3,000 job cuts.

The Spanish bank does not have a branch network in the UK and will seek efficiencies through improvements to IT systems. Abbey currently has a 26,000-strong workforce.

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