A&L takeover deal approved by shareholders
Alliance & Leicester shareholders have voted in favour of the bank’s £1.3 billion takeover by Santander, the Spanish owner of Abbey.
A&L has been hit by the ongoing credit crunch, and its board recommended the deal to shareholders citing the extra security the Spanish banking giant would offer. It only made a profit of £2 million in the first half of the year, compared with £290 million in the same period last year.
The bank’s 560,000 shareholders obviously agreed, with the overwhelming majority voting in favour of the takeover.
Although only 75% was needed for the deal to get the green light, 96% of shareholders voted ‘yes’ to the deal, compared with 3% voting ‘no’. The remaining shareholders - 791,197 - withheld their votes.
Once the deal is completed, A&L will join Abbey as part of Santander’s existing UK subsidiary. The combination of the sixth and eight largest banks in Britain would create a total of nearly 960 branches.
The European Commission recently gave its approval for the deal to go ahead, stating that it would not harm competition in the sector, since it would constitute no more than a 15% market share.
"After examination, the commission concluded that the proposed operation would not significantly impede effective competition in the European Economic Area," the EU executive arm said in a statement.
A&L first held talks with the Spanish bank last December, and has been frequently touted as a takeover target since the former building society floated on the stock exchange back in 1997.
Its shares ended 6% lower on Monday after the collapse of investment bank Lehman Brothers shook confidence in the UK’s banking sector.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.