WITH seven words at 4.17pm in Edinburgh's Court of Session, a judge gave the verdict that will ensure the 313-year-old Bank of Scotland becomes part of a superbank that is definitely run from London and 43%-owned by the taxpayer.

"I am prepared to grant the orders," said Lord Glennie.

The words gave clearance to the scheme of arrangement chosen as the legal means for completing the controversial takeover of HBOS by Lloyds TSB that was brokered by the government.

They mean that there are no further legal obstacles in the way of a deal that will see HBOS become part of the giant Lloyds Banking Group from Monday.

Shares in HBOS will be suspended from 6pm tomorrow.

At 8am on Monday morning shareholders in HBOS will swap each share in that bank for 0.65 shares in Lloyds Banking Group.

Yesterday a spokesman insisted the deal was good for HBOS, which came close to collapse last year after the wholesale markets on which it relied to fund huge lending to homeowners and businesses seized up.

"We welcome today's decision by the Court of Session. This is in the interests of shareholders and customers alike."

The enlarged group will be run by Lloyds TSB directors.

Yesterday it was confirmed that the taxpayer will have a dominant stake in the group after investors snubbed share issues launched by both banks to help them deal with the consequences of a recession.

HBOS won orders for 0.24% of the shares it set out to issue. Just 0.5% of the Lloyds TSB offer was taken up by investors. As the government underwrote the issues, which will raise £13bn in total, it will have to buy all the shares which were not taken.

At yesterday's closing price it was sitting on hefty paper losses on its investment.

The government is also buying a total of £4bn in preference shares.

While all directors in Lloyds TSB bought shares, HBOS did not give details of take-up by directors.

The judgment brings down the curtain on a long saga.

The plans for the takeover were announced in October, provoking uproar.

Sir Peter Burt, the former chief executive of Bank of Scotland who presided over its sale to the Halifax in 2001, led an attempt to get shareholders to block the plan.

However, investors in both banks gave overwhelming backing to the takeover at meetings late last year.

A group of business people in Scotland then formed a Members Action Group, which tried to have business secretary Lord Mandelson's decision to approve the takeover thrown out by competition authorities.

Last week trustees for the HBOS pension scheme shelved possible legal action.

In a court room strewn with boxes of files, Lord Glennie spent most of yesterday listening to David Sellar QC, acting for HBOS, detailing how conditions applying to the scheme of arrangement had been met. The hearing was notable for the fact that there were no protests by shareholders.

However, proceedings were lengthened following an intervention by two sector-watchers.

Robert McDowell, an Edinburgh-based banker, and financial journalist Ian Fraser said they did not want to obstruct the takeover and only wanted to ensure all the issues had been considered carefully.

Before the meeting McDowell told The Herald: "The first motivation for this is a sentimental, knee-jerk one. In my opinion HBOS is not nearly in the kind of state that many assume it is.

"I see no reason why it needs to be taken over by Lloyds TSB."

The men submitted a letter raising concerns ranging from the procedures adopted for the vote by HBOS shareholders on the takeover to the possibility that the reporter appointed to advise the court on the scheme may have a conflict of interest.

McDowell estimated that more than a third of shares in HBOS were owned by six institutions, meaning a small number could have had a huge impact on the vote. He noted speculation that some may have supported the takeover in the expectation that they could benefit from a break-up of HBOS. He said there should have been separate meetings for shareholders with holdings in both HBOS and Lloyds TSB.

However, Glennie said shareholders could have many reasons for voting in the way they did, including their own commercial interests.

"There is no impropriety in that," he said.

Fraser said he wanted to be assured that the court appointed reporter, Paul Hally of Scottish law firm Shepherd & Wedderburn, had satisfied himself that there was no "hidden agenda" in deciding to hold the general meeting of HBOS shareholders outside Scotland.

Glennie said Hally had been satisfied that the meeting had been held in Birmingham for convenience.

He said he had been shown evidence that the bulk of the shareholder base was in the south and Midlands of England.

Sellar provided an analysis showing only 52,000 out of the 650,000 shareholders lived in Scotland.

Fraser also asked whether the court had considered whether Hally might have a conflict between his interests as a reporter to the court regarding the scheme of arrangement and the fact his firm works for the bank.

"It may be of note that an organisation called the Members Action Group was seeking legal representation in Scotland and universally law firms it approached declined to represent it citing possible conflicts of interest" he told the court.

"The suspicion is that there is an uneven playing field."

However, Glennie said "At the first hearing there was consideration given to whether it would be possible to find a reporter that did not have links with Lloyds TSB or HBOS. The view was that it would not be possible to find a firm with the right experience and of the right size that did not have links."

Sellar repeatedly praised the thoroughness of Hally's work.

Shares in HBOS closed up 5.4%, or 4.25p at 84.125p, well adrift of the 113.6p at which the Government bought shares Lloyds TSB closed up 7%, or 9.25p, at 140.75p, 19% below the offer price.

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