Post by a more piratey game on Mar 12, 2015 18:08:14 GMT
TSB shares jump as Spain's Sabadell considers takeover offer
One of Spain's largest banks is in talks to buy newly-independent TSB, sending shares soaring
TSB was carved out of Lloyds on the European Commission's orders Photo: Gabriel Szabo/Guzelian
By James Titcomb
3:30PM GMT 12 Mar 2015
TSB, Britain’s seventh-biggest bank, has announced a shock £1.7bn offer from Spain’s Banco Sabadell, less than a year after Lloyds floated the bank.
The surprise announcement triggered a 24pc rise in TSB’s share price, with both the bank and its majority owner saying they were likely to accept the bid.
The support of the heavyweight Spanish group could see TSB, which has 4.5m customers and more than 8,000 employees, make an aggressive push for growth that would boost business lending and push down mortgage costs for households.
Sabadell would “accelerate the expansion of TSB’s presence in the SME sector”, the bank said, while Sandy Chen of Cenkos Securities predicted that “[its] entry into the mortgage market will add to downward margin pressures”.
In a frantically-published announcement, which came just minutes after reports of Sabadell’s bid emerged, TSB said its board had indicated to the Spanish bank that it was willing to recommend the 340p-a-share price to investors.
Lloyds, which floated TSB last summer and retains just over 50pc of the bank, said it “would be minded to accept an offer at this price”.
The bid is a 31pc premium on the price that Lloyds floated it for, and a sale would see it cleanly dispose of its remaining stake before the end of the year, as the bank is being forced to by the European Commission.
Lloyds was ordered to sell more than 600 branches in 2009 due to its £20bn taxpayer bail-out the previous year. It had planned to sell them to the Co-operative Bank but the deal fell apart at the eleventh hour when the Co-op discovered a £1.5bn black hole in its accounts.
In 2013, it spun off TSB, reviving the high-street name 18 years after Lloyds took over the 185-year-old institution. Lloyds then floated the bank in June and sold off a second chunk of shares in September.
Sabadell, which hails from the city of the same name in Catalonia, is Spain’s fifth-largest banking group, and is trying to build an international presence after the country’s deep recession saw business dry up.
Shares in the Spanish bank were suspended on Thursday after a 9pc fall, with investors predicting that the bank would need a hefty rights issue to fund the cash takeover of TSB.
The company is known for its business lending heritage, unlike TSB, which is primarily a retail bank with a minimal SME loan arm, as well as its prowess at efficiently integrating banks it acquires.
TSB is currently renting its IT systems from Lloyds at a cost of £100m a year, which is due to double in 2017. If the bank is able to move onto a new infrastructure before then, as would be expected under Sabadell’s ownership, TSB unlocks a payment of up to £450m from Lloyds.
“This is a meaningful number relative to TSB’s market capitalisation,” said Joe Dickerson, an analyst at Jefferies, who said becoming part of Sabadell would decrease the bank’s risk profile, freeing up capital.
Sabadell is believed to have informally approached Lloyds’ board last month to seek its blessing before making a more detailed proposal to TSB around two weeks ago.
It now has until April 9 to make an offer, although any counter-bid is seen as highly unlikely, with Lloyds likely to have offered the business around to potential buyers before floating it.
TSB is well-capitalised and was seen as a likely acquirer of smaller UK banks or mortgage portfolios, with it rumoured to have considered a bid for Aldermore before the Peterborough-based bank floated earlier this week.
Lloyds, which has spent £2bn on spinning off TSB, would receive around £150m extra from selling its stake to Sabadell than it would have at the bank’s 264p share price before the interest from Spain emerged.
Shares in Lloyds, 23pc owned by the taxpayer, rose 1.6pc. Citigroup and Rothschild are acting as financial advisers to TSB, and Goldman Sachs is acting as financial adviser to Sabadell.