Free share handout for 10m customers

More than 10 million customers of the Halifax and Leeds building societies will be allowed to receive payments worth between £500 and £700 in the biggest share bonanza in British history, the High Court ruled yesterday.

Savers with more than £1,000 deposited before the proposed merger of the two building societies was announced on 25 November last year will receive much more than that. One City banker described the proposed merger deal as "more like the National Lottery than a share issue".

The High Court ruling clears the way for the Halifax, Britain's biggest society, to merge with its fifth largest rival the Leeds and then convert from mutual status into a bank, via a £10bn stock market flotation.

Customers have to vote in favour first of the merger, which should be completed by August, and then the conversion, which will include the free share payout.

The share issue will take place late next year at the earliest - or early 1998 at the latest - depending on stock market conditions and the legal process.

Assuming that the newly formed bank is valued at between £8bn and £10bn, both mortgage borrowers and investors with at least £100 will receive a basic share package worth £500-£700.

On top of this, the Halifax and Leeds are planning to give extra shares to investors with deposits above £1,000 up to a limit of £50,000. They will get additional shares on a percentage of their deposits, probably 5-10 per cent, according to sources close to the societies.

Assuming that the new bank is valued at £8bn and the additional percentage is 5 per cent, this means a depositor with £1,000 in either society before 25 November last year will get shares worth £650.

If the additional percentage is 10 per cent, depositors with £50,000 will get £5,500.

Mortgage customers will get the basic allocation of around £600. Savers with less than £100 invested or people under 18 will receive a statutory cash bonus which is yet to be fixed but which will be 5-10 per cent of their balance.

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