Spanish banking giant Santander, which already owns Abbey, has made an opportunistic bid for Alliance & Leicester. Its plans to merge the two in order to achieve a stronger position in the UK banking market are good news for consumers.
Santander’s £1.25 billion takeover bid, 317p per share, is at less than half the 700p level that Santander offered and that the A&L board rejected last December. Will any of the A&L board members resign or be sacked over this massive loss for shareholders? No, they’ll all collect big bonuses. The fact that they accepted the bid shows that despite claims that A&L is financially strong, they feared a similar fate to Bradford & Bingley if they tried to tough out the credit crunch on their own.
Santander’s UK rivals will try to present the deal as one that reduces competition, but the truth is the opposite, and the UK banks have every reason to fear a stronger Santander competing with them more aggressively. Santander has a commanding position in the Spanish market because it offers a good service to its customers. It has finally got Abbey’s banking services using its own software, and is now ready to start investing in the branch network and improving the services on offer. Buying 250 A&L branches for £1.25 billion to add to Abbey’s 700 will save Santander a fortune on its projected branch opening programme, and with its own stockmarket value over £50 billion, the cost of A&L is small beer.
A rival bid is possible, Lloyds TSB being the obvious candidate, since it did consider buying Northern Rock last year. The £1.25 billion price is a steal on any sensible measure of value, but with B&B’s horrible fate fresh in their minds, A&L shareholders may decide they’d better take Santander’s money and run.
