Abbey allays fears over Santader takeover

Thousands of Abbey National shareholders have been calling the company after this week's £8.5bn agreed takeover bid from Spain's Grupo Santander, owner of Banco Santander.

Most are checking that Abbey has their correct address for the flood of documents coming their way, but many are concerned about the problems connected with accepting a bid from a foreign company.

An Abbey spokesman said: "We will be writing to shareholders in September with a full explanation of what is being proposed. After that there will be a meeting of our shareholders, probably in October, where they will be asked to approve the proposals and finally a court hearing to bring it into effect."

However, there are a number of other events which have to happen before the legal scheme of arrangement can become effective, such as regulatory approvals. Banco Santander will also need to get the approval of its own shareholders. This could take until November, assuming no other bank comes in with a counter-bid. Abbey's board, led by Lord Burns, has recommended the Santander offer of 31p cash plus one of its own shares for every Abbey share, but that would fall by the wayside if a higher offer emerged. Citigroup of the US is a favourite tip.

Some shareholders have been unhappy that the 31p is being paid as a special dividend from Abbey's own coffers. Recipients will have to pay income tax on this, at either 25 per cent or 40 per cent depending on their own highest rate. But if it was being cast as a capital repayment, it would only be liable to capital gains tax, which many small investors do not pay.

Holders of Abbey's loan notes and preference shares are being left out in the cold, as the Spaniards do not have to buy these securities and have made it plain they do not want to.

But Santander is keen to keep Abbey shareholders on its own share register. Its spokesman said it pays dividends four times a year instead of twice, which is traditional in Britain. And, unusually for a bank, Santander offers a string of perks, from cut-price medical insurance to wine and hams.

But, for those who do decide to get out, Santander will provide a facility to shareholders who own less than 2,000 Abbey shares to sell their new Santander shares through Abbey's branch network for sterling without paying dealing or foreign exchange charges.