Halifax and Leeds offer pounds 8bn bonanza

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The Independent Online
In one of the world's biggest share giveaways, more than 8 million customers of the Halifax and Leeds Permanent building societies are set to receive windfalls worth an average of pounds 1,000 each with agreement between the societies to merge and then float on the Stock Exchange.

The two societies were forced to bring the announcement forward by two weeks after the Independent reported the impending deal yesterday.

It is understood that the merger would cost some 4,000 jobs out of a combined 27,000-strong workforce. The Leeds and Halifax said they intended to avoid sackings by concentrating on natural wastage, which would account for 1,000 jobs a year.

The UK's first and fifth largest building societies intend to merge next year, and convert from mutual building societies to become a single bank in 1997. By floating on the Stock Exchange the new group, to be called ``The Halifax'', will become one of the biggest quoted companies in Britain.

The basis under which members will qualify to receive free shares is still to be determined. The share giveaway requires agreement from the Building Societies Commission, and the legislation concerned is complicated. Jon Foulds, chairman of the Halifax, said staff and pensioners would benefit.

At least 6 million Halifax investment account holders and 2 million Leeds investment account holders are likely to receive shares. Another 1.86 million Halifax mortgage borrowers and 500,000 Leeds mortgage customers will also be eligible.

Derek Fatchett, Labour MP for Leeds Central, said: ``Staff from both societies have been contacting me all day because they are afraid there will be substantial job losses.''

Halifax and Leeds staff issued a joint statement under the Financial Services Staff Federation: ``The Federation remains to be convinced of the benefit of the proposed merger for its constituents, the industry and society as a whole.

``The Federation believes that it would be quite wrong to combine the two societies if the end result is less customer choice, more boarded-up premises on our high streets and more unemployment.''

The proposal to convert to a bank deals a body blow to the embattled concept of mutual building societies that are owned by their customers.

Halifax and Leeds together will have a quarter of the UK mortgage market, including mortgage lending by banks, making a reference to the Monopolies and Mergers Commission a possibility.

The Office of Fair Trading has given no indication to the societies of its intentions. The criteria for referring any deal to the MMC is usually that the new entity would have over a quarter of its market.

Alistair Darling, Labour spokesman on financial services, has written to the Chancellor asking him to clarify government policy on this type of merger. ``We are concerned about the effect on competition and choice if the industry is dominated by a few large financial conglomerates.''

The new group will retain both the societies' head offices. Life insurance, unit trusts and other financial service businesses will be based at the Leeds head office, reflecting Leeds' success in this area.

The City is convinced there is still a possibility of a counter-bid for the Leeds from other financial institutions. HSBC, which owns Midland, has been touted in the City, as has the tobacco conglomerate BAT.

Yesterday's announcement will increase pressure on other societies to merge and convert to a bank. Woolwich and Alliance & Leicester are the most widely tipped to make a move.

-------------------------------------------------------------------------------- -------------------------------------------------------------------------------- THE MERGER: MAIN POINTS ------------------------------------------------------------------------------- - More than 8 million customers, staff and pensioners to get up to pounds 1,000 in shares in two years' time. - Customers to vote on merger next spring. New group floated on stock market in 1997, creating Britain's third-largest high street bank. - Up to 4,000 jobs to go, most at Leeds Permanent. ------------------------------------------------------------------------------ -------------------------------------------------------------------------------- /ET

Further reports, page 16

View from City Road, page 17

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