Abbey 'yes' to Spanish bid

ABBEY National today agreed to a takeover bid from Spain's Santander Central Hispano (SCH) worth more than £8bn.

The move will create the world‘s eighth largest bank, the fourth largest in Europe by market value, and will transform the profile of the former building society.

A short statement today confirmed that the two banks had agreed on the terms of a recommended cash and shares offer for Abbey. A more detailed announcement outlining full details of the takeover will be made later today by Santander‘s chairman Emilio Botin and chief executive Alfredo Saenz.

Analysts, however, believe that the Spanish will offer between 550p and 580p a share, which would value Abbey at more than £8bn.

This is less than half the £18bn offered by Lloyds TSB three years ago, but is seen in the City as a good price given Abbey‘s recent financial difficulties.

Abbey‘s share price has fluctuated wildly over the past few months, thanks to both takeover rumours and concern about its financial recovery.

Chief executive Arnold Luqman insisted recently that Abbey would return to the black this financial year after £686m losses last year and a £947m deficit the previous year.

The recovery process is now well underway. The takeover by SCH, however, is expected to help.

SCH‘s takeover of Abbey is likely to generate substantial cost savings and enable technology improvements at the UK operation. There could well be job losses from the bank‘s 29,500-strong workforce.

Abbey has restructured in the wake of a disastrous attempt to get into wholesale banking and has cut jobs, sold non-core assets and rejigged operations in a three-year overhaul designed to reverse two years of heavy losses.

Abbey is committing itself more to personal finance activities and is winding down or selling all of its other interests.

The acquisition of Abbey is seen as a good move for SCH too. Not only will it give the Spanish bank a much stronger presence in the EU but it will also help to outweigh its exposure in Latin America, seen by analysts as a higher risk area in which to operate.

SCH‘s acquisition comes just three years after Lloyds TSB‘s bid was blocked by competition authorities. Until Friday, however, the Spanish were merely the latest in a long line of would-be suitors for Abbey, which itself only came to the stock market in 1999.

In 2002 Abbey rejected a takeover approach from the Bank of Ireland, Eire's biggest bank, saying it was not in the best interests of shareholders. That year, Australia's largest bank, National Australia Bank, said it approached Abbey about a possible takeover but the talks ended without a deal.

Since then, Royal Bank of Scotland executives said they would like to buy Abbey but they didn't believe regulators would permit the takeover.

Abbey No.2 jumps ship

STEPHEN HESTER, Abbey National's £1.2m-a-year chief operating officer, is jumping ship to take the top job at property developer British Land.

Hester will become British Land's new chief executive, after the Abbey bid situation is resolved. His appointment ends a long search for a successor to John Ritblat, who will take a step back and become chairman.

The firm came close last May to appointing a replacement for Ritblat, a huge personality in the UK property sector but who has been criticised for his iron grip on British Land, only to see the candidate back out at the last minute.

Ritblat, who has steered British Land since 1971, had earlier said he would shed the chief executive post no later than July 2004.

His long innings at the company, which he nurtured to become a London market blue chip, had irked some investors, one of which had campaigned hard last year for his departure.

Hester, 43, is credited with helping Abbey return to its core retail business after a disastrous foray into wholesale banking under previous management.

He joined Abbey as its finance chief in May 2002 after 20 years at Credit Suisse First Boston.