View from City Road: Cheering on C&G from the sidelines

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If Lloyds Bank and Cheltenham & Gloucester Building Society are ever allowed to consummate their proposed marriage, it will apparently require an astonishing 250 tons of paper to circulate the society's 1.4 million members with the necessary details. Leaving the ecological implications aside, C&G has some tough decisions to take.

While City opinion overwhelmingly assumes the deal will go through regardless of the legal obstacles, simply because both sides want it so badly, C&G still has to decide how best to approach it.

Does the society seek to overturn the Vice-Chancellor's veto on payments to members under two years' standing by lodging an appeal? Or does it seek to win a yes vote from members under the tight conditions decided on by the court?

C&G's computers are overheating trying to work out whether it can win the votes needed while disregarding the 226,000 voting members deprived of payments averaging pounds 1,700 apiece by the Vice-Chancellor's judgment. All notions of offering the newcomers some other form of benefit such as preference shares has been ditched, as it would be interpreted by the courts as seeking to get round the Vice- Chancellor's ruling.

So, too, is any alternative to the Lloyds takeover, such as conversion to plc status based on the Abbey National model. Andrew Longhurst, C&G chief executive, believes that he has already got the best possible price.

With the mortgage market becoming increasingly competitive, survival will require the big distribution volumes offered by combining with Lloyds, he believes.

So C&G will press ahead with the Lloyds deal despite the uncertainties. At least three institutions will be cheering C&G on, albeit privately. TSB, Bank of Scotland and Royal Bank of Scotland all dearly want to buy a building society too.

Have the Building Societies Commission, the Treasury and disgruntled C&G depositors the wherewithal to stop this pent-up demand? Not if Mr Longhurst gets his way.