Both Lloyds TSB and HBOS have today announced their participation in the Government's rescue scheme that will see them boost their joint balance sheets by £17billion, as the merger looks set to go ahead.
In a circular released this morning, Lloyds TSB
announced its plans to seek £4.5billion from investors with the back up of the Government; the bank will also offer the Government preference shares worth £1billion.
has today announced it intends to raise £8.5billion through investors and will offer the Government preference shares worth £3billion. Both banks will then be part owned by the Government.
In a letter to Lloyds TSB shareholders today, Sir Victor Blank, chairman of Lloyds TSB Group defended the banks' actions stating: "The Lloyds TSB Directors believe that Lloyds TSB's and HBOS's participation in the Proposed Government Funding provides the capital necessary to complete the Acquisition in a timely fashion, with certainty and on the terms that the Lloyds TSB Directors believe are the best available to Lloyds TSB and HBOS in current market conditions."
According to Sir Blank, "When combined with the new capital being raised by HBOS, the Proposed Government Funding is designed to provide the Enlarged Group with the capital strength and the funding capabilities to meet the short-term challenges that current markets present and support the longer-term creation of shareholder value."
This weekend, Secretary of State for Business, Peter Mandelson, gave regulatory clearance to the merger, claiming it is in the public interest. He said: "I am satisfied that on balance the public interest is best served by allowing this merger to proceed without reference to the Competition Commission."
The Office of Fair Trading (OFT
) has released a report regarding the possible effects of the merger on competition; however, Lord Mandelson believes these are outweighed by the benefits.
Nevertheless, the announcement has met some opposition from consumer company Which?, whose chief executive, Peter Vicary-Smith, said: "The normal competition regime isn't sufficient to deal with the super-bank that's being created otherwise the OFT would not have asked for the merger to be referred to the Competition Commission.
"We accept that there are exceptional circumstances which may make the merger necessary, but steps need to be taken to ensure consumers don't lose out in the long run."
The acquisition of HBOS by Lloyds TSB has today been confirmed by both HBOS and Lloyds TSB, despite rumours of rival bids.
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