Lloyds TSB today revealed the terms of its dramatic takeover of Edinburgh-based banking giant HBOS.
Lloyds TSB today revealed the terms of its dramatic takeover of Edinburgh-based banking giant HBOS.
Amid fears for up to 24,000 jobs and anxiety about historic links with Scotland, Lloyds TSB revealed:
The Bank of Scotland brand would survive.
The new bank's Scottish HQ would remain at the old Bank of Scotland building on The Mound.
The bank would still issue Scottish currency.
It would strive to preserve jobs north of the border.
The new bank's annual general meeting would be held in Scotland.
The all-share deal values HBOS shares at 232p each, much more than yesterday's closing price of 147.1p.
The giant new group will hold a third of the UK mortgage market, but competition watchdogs will not block the deal as it was backed by the government.
Following the takeover, Lloyds chief executive Eric Daniels is expected to take the helm of the enlarged group. The future of HBOS chief Andy Hornby is unclear.
Mr Daniels confirmed there would be job cuts but said reports of 40,000 redundancies were putting the figure too high.
Lloyds chairman Sir Victor Blank, who is understood to have helped broker the deal with Gordon Brown, said: "This will be a unique opportunity to accelerate and extend our strategy and create the UK's leading financial services group."
The tie-up is expected to ceate cost-savings that would enable the firm to boost its earnings by about £1bn a year by 2011.
Under the terms, which must be agreed by investors, HBOS shareholders will receive 0.83 Lloyds shares for every HBOS share.
"This is the right transaction for HBOS and its shareholders," said HBOS chairman Dennis Stevenson.
"Against the backdrop of the very high levels of volatility our industry is experiencing, the combined group will be one of the strongest players in the UK financial services sector.
"In addition, the combined group will have excellent brands and a very powerful franchise," he added.
The government had opted to push through the Lloyds TSB-HBOS tie-up after HBOS voiced concerns that depositors and lenders had begun to withdraw their credit from the bank.
Despite the asurances there are fears thousands of Scottish jobs are in the balance.
Yesterday First Minister Alex Salmond attacked "speculators" he blamed for bringing down Scotland's oldest bank.
HBOS, Britain's biggest home-loan lender, confirmed the talks after its shares were battered for a sixth consecutive day yesterday on mounting fears about its funding position yesterday. Even that did not stop the slide, and the shares ended 19% lower at 147.1p, valuing the bank at £8bn.
HBOS has lost more than half its value in the past six days as its shares crashed from 308.5p on September 9 to an all-time low of 88p earlier yesterday.
HBOS has more than 17,000 staff in Scotland, while Lloyds TSB employs more than 7000. The combined staff of the banks across the UK would be around 140,000.
The takeover is likely to have a far bigger impact at branch office level than the Halifax merger with Bank of Scotland in 2001, when only 6000 job cuts were made.
For Lloyds the merger could cut costs, increase market shares and lift margins to offset the prospect of higher bad debts as the economy worsens, but this would depend on the terms of any deal, analysts said.
Mr Salmond said: "There's going to be a huge job of advocacy in the Scottish interest. I have spoken to senior officials in both banks today and made it clear that we will be making sure these representations are made.
"I am very angry that we can have a situation of a bank being forced into a merger by basically a short-selling bunch of spivs and speculators in the financial markets. We should not have situations where well-capitalised, properly funded financial institutions are subject to incredible speculative attack, and that drives them into decision- making which otherwise they might not have done."
Labour urged Mr Brown to use his influence to ensure Scottish jobs were protected.
Meanwhile, the US stock market took another nosedive overnight as the American banking system appeared even shakier and investors worried that the financial crisis is spinning so far out of control that even government rescues cannot stop it.
The Dow Jones industrial average, which only two days earlier had suffered its steepest drop since the days after the September 11 2001 attacks, lost another 450 points. About 389bn in investments vanished.
A day after the Federal Reserve stepped in with an emergency loan to keep American International Group, one of the world's largest insurers, from going under, Wall Street wondered which companies might be the next to falter.
A major investor in ailing Washington Mutual removed a potential obstacle to a sale of the bank, and stock in two investment banks, Morgan Stanley and Goldman Sachs, was pummelled.
It was the fourth consecutive day of extraordinary turmoil for the American financial system, beginning with news on Sunday that another venerable investment house, Lehman Brothers, would be forced to file for bankruptcy.
