In a deal worth 1.26 billion pounds, British bank Alliance and Leicester is to be taken over by Santander, Spain's biggest bank. Santander took over another British lender, Abbey, in 2004.
Spain's biggest bank, Santander, said Monday it had reached agreement to buy British lender Alliance and Leicester in an all-share deal worth 1.26 billion pounds (1.57 billion euros) as it continues its push into the British market.
Under the terms of the deal Santander, which acquired British bank Abbey in 2004 for 9.2 billion pounds, will offer one of its shares for every three shares in Alliance and Leicester, the Spanish bank said in a regulatory filing.
"The acquisition of Alliance and Leicester will be a significant step in the development of Santander's UK business," Santander chairman Emilio Botin said in a statement.
Santander plans to merge Alliance and Leicester with Abbey, a move which it predicts will lead to annualized cost savings of more than 180 million pounds before tax by the end of 2011 and likely involve hefty job cuts.
Alliance and Leicester has over 700 branches while Abbey has about 250 branches.
Since taking over Abbey in 2004, Santander has cut staff numbers by almost a third to around 16,000.
Asked whether he was worried about a foreign company taking over a British high street name, British Prime Minister Gordon Brown told reporters at his monthly press conference: "I just say that we benefit from having an open economy in Britain.
"We have made it very clear that we're open to foreign investment in both our financial sector and our energy sector," he added.
The deal, which still requires clearance from British and Spanish regulators, values Alliance and Leicester at 299 pence a share, a premium of about 36.4 percent over the closing price on Friday of 219.25 pence.
Shareholders will also be eligible for an 18 pence interim dividend from Alliance and Leicester, taking the total value for shareholders to 317 pence, or a 44.6 percent premium on Friday's closing price.
Alliance Leicester has long been seen as a potential takeover target.
Like many global banks, it has been hit by the US subprime home loan crisis and the subsequent worldwide squeeze on credit that began last August and has seen its share price tumble as a result.
Commercial banks have turned increasingly cautious about lending money to one another in the credit-crunch and many have had to take massive writedowns on their exposure to complex investments in the US subprime or higher risk loan market.
Santander said it will bolster the capital of Alliance and Leicester by around one billion pounds to strengthen the British bank's balance sheet in order to carry out the deal.
Date created : 2008-07-14