Your Abbey questions answered

ABBEY NATIONAL has agreed to a takeover bid from Spain's biggest bank, Banco Santander Central Hispano, in an offer worth more than £8 billion. Liz Phillips asks what this means for Abbey's 1.7 million ordinary shareholders.

HOW much will I get?
YOU will get one new Banco Santander share for every Abbey share you own plus 31p a share in cash. Based on the Spanish bank's closing price yesterday, this values each Abbey ordinary share at 560p. So someone with 100 shares would receive £31 plus 100 Banco Santander shares.

CAN I still sell my Abbey shares now?
THAT's not a problem. Abbey shares are still being traded on the London Stock Exchange. On Tuesday they closed at 567p a share - up about 80p from last week. And they are unlikely to be suspended - if at all - until at least the deal has been done.

WHY is Abbey accepting this offer when there have been higher offers before?
THREE years ago Lloyds TSB offered £18 billion for Abbey, when the shares were trading at nearly £13 each. The offer was referred to the Competition Commission which refused to clear it. Then 18 months ago, Bank of Ireland showed an interest in Abbey, but it never went ahead with an offer.

The board of Abbey has unanimously voted in favour of the Banco Santander offer. The Spanish banking group has interests in Latin America and other European countries, and is the second largest banking group in the Euro zone. Since 1994 its share price has grown by 370%.

ARE other companies likely to come in with a better bid?
THERE are rumours that others such as Citigroup in the U.S. are interested, but it's unlikely to be another UK bank because of the difficulties of getting an offer approved by the authorities.

IS this a good offer?
ABBEY has had problems in the past. Its profits and its share price were down, which is why it is a takeover target.

If you've held the shares since the company demutualised in 1989, you'd have 100 shares for being a saver with the former society, 100 for having an Abbey mortgage and the option to buy another 775 shares at the flotation price of 130p. You will be making a profit, but it's a long way from their peak in April 1999, when the shares were £14.35 each.

I DON'T like the idea of holding foreign shares. What advice can you give me?
THE good news is that Banco Santander will pay UK shareholders' dividends in sterling rather than euros and you will get them four times a year. Also, when you sell through Abbey branches you'll be paid out in pounds.

But the shares and dividends are still priced in euros. Ben Yearsley of independent financial adviser Hargreaves Lansdown says: 'Fluctuations in the foreign exchange rate add another element of risk to the shares. A lot of Abbey shareholders got them when it demutualised, so they haven't had to deal with this before.'

WILL it be harder to sell the new shares in future?
POSSIBLY. Madrid-based Banco Santander Group is quoted on the Spanish stock exchange - and not many brokers deal with Bolsas de Valores. However, Santander will provide people who have 2,000 shares or fewer with a dealing facility in the UK. Nearly all their retail shareholders have fewer than 1,000 shares.

The details have still to be finalised, but they want to bring in a free dealing service for their shares through Abbey branches, provided they get regulatory approval.

WHAT if my shares are in a Pep, Isa or nominee account with a broker?
THE free share-dealing service, if it comes off, is likely to be available only to people who have their share certificates. You will have to contact your Pep or Isa manager to see whether you can continue to hold them once they become Banco Santander shares and what charges they have to enable you to trade them.

Most major managers and stock brokers allow you to hold European shares in Peps and Isas.

I AM a customer of Abbey. Will I get free shares?
NO. There will be no free shares for savers or borrowers. This is a takeover of one company by another, not a demutualisation. Abbey National gave free shares when it floated on the stock market in 1989. The only people to be affected by this takeover are those who currently hold Abbey shares.

WHAT happens next?
THE document explaining the details of the offer and voting forms will be sent out to shareholders in September.

The Extraordinary General Meeting (EGM) when you can vote on the offer will be held in October. If the shareholders agree to the offer, the courts will have to approve the scheme. Banco Santander is hoping to have the deal finalised by the end of the year.

WHERE can I go for further information?
YOU can keep abreast of developments by going to www.abbey.co.uk/corporate/share holder centre (0870 533 9430) or by coming back to This Is Money. Click on the link above for stock exchange announcements and an archive of recent news reports.