Rights issue race is on for HBOS and B&B as Alliance & Leicester sparks takeover talk

14 July 2008 / by Rebecca Sargent
Bradford & Bingley is expected to secure shareholder support for its controversial rights issue later this week, just as HBOS's deal is due to close.

Bradford & Bingley will meet with its shareholders this Thursday as they will decide the buy-to-let mortgage specialist's fate as it asks for backing to the tune of £400million.

And, although Bradford & Bingley has upset several shareholders through unashamed moves, it is thought that the rights issue will go ahead, as the alternative could have a detrimental effect on the UK mortgage market.

Meanwhile, HBOS's £4billion rights issue is due to close on Friday with a reported four fifths of shareholders expected to take up their rights. Experts have predicted that around 20 per cent of the HBOS rights issue shares will remain unsold, a consequent total of £800million that will be bought by HBOS's underwriters who are Morgan Stanley and Dresdner Kleinwort.

Bradford & Bingley has been at the centre of much speculation concerning its rights issue as its share price dropped below the rights issue price and has so far remained relatively low. However, underwriters Citi and UBS and sub-underwriters have guaranteed to pick up the pieces in case shareholders refuse their rights.

Last week reports were rife that Alliance & Leicester was suffering on the back of the Bradford & Bingley fiasco. News today is the acquisition of Alliance & Leicester by Spain's largest bank, Santander, which already owns Abbey.

The news, confirmed today by Alliance & Leicester, has seen its shares soar by almost 50 per cent as consumer confidence is reassured. Commenting on the acquisition, Roy Brown, acting chairman at Alliance & Leicester, said:

"The board has taken the decision to recommend the acquisition by Santander after careful consideration. A&L is a strong and attractive business and its resilient performance is proof of the quality of its franchise.

"However, the board is acutely aware of the significant external risks presented by the deterioration in economic conditions and the continuing turbulence in the financial markets."

Meanwhile the Financial Services Authority (FSA) continues its search for a potential buyer for Bradford & Bingley, focusing on the main six banks that are sub-underwriting its rights issue, although Barclays and Lloyds TSB have reportedly suggested they will not be pursuing a takeover.

© Fair Investment Company Ltd