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Friday, 3 November, 2000, 11:25 GMT
BoS rejects Abbey National approach
Abbey National, Bank of Scotland graphic
Both firms are expected to become take-over targets
Bank of Scotland has rejected a take-over approach by The Abbey National, saying it would be 'unlikely' to benefit shareholders.

The Abbey National said on Friday a takeover of BoS would "create value" for shareholders of both banks.

But BoS said in a statement: "It seems unlikely that Abbey National's approach will lead to a satisfactory transaction for Bank of Scotland shareholders.

"But of course the board always reviews opportunities to optimise shareholder value."

Confusing strategy

The bungled courtship has sparked speculation that BoS and Abbey National are now at the mercy of potential predators such as Lloyd's, Barclay's or The Royal Bank of Scotland.

The National Bank of Australia has also been motioned by analysts as a possible bidder for Abbey National.

Abbey National said it had approached BoS last week about a possible take-over.

BoS is reported to have responded coolly, saying it had already suggested a merger with Abbey National in the summer, but that Abbey had walked away.

"This move makes Abbey's strategy look rather confusing. It looks as though they have written their own suicide note," said Keith Baird, banking analyst at Pru-Bache Securities.

Abbey National shares were up 87p at 1,056, following news of the bungled take-over bid, while Bank of Scotland climbed 17.5p at 693.5.

Megabank

A takeover would have boosted Abbey National's presence in Scotland, following the 1.8bn takeover of Scottish Provident in September.

It would also have brought together BoS's 325 mainly Scottish-based high street branches with Abbey's 800 branches, in a company with a market value of about 23bn, creating a fifth force in UK banking.


For Abbey National, a merger with Bank of Scotland would give them greater diversification away from mortgages, which has become increasingly competitive and less profitable

Banking analyst Ian Hodges

Bank of Scotland is understood to have been keen to speak to potential merger partners since losing the drawn-out battle for NatWest, which was eventually taken over by arch-rival Royal Bank of Scotland.

Banking analyst Ian Hodges, of Barclays Stockbrokers, said: "They [Abbey and BoS] are a similar size and both have attractions for one another.

"Bank of Scotland has a very small mortgage business and bringing in Abbey National will give them greater exposure to mortgages.

"For Abbey National, a merger with Bank of Scotland would give them greater diversification away from mortgages, which has become increasingly competitive and less profitable."

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See also:

03 Nov 00 | Business
Bank merger wave
07 Sep 00 | Business
Abbey takes out life insurance
07 Sep 00 | Business
Jobs go in 1.8bn takeover by Abbey
07 May 00 | Business
Barclays 'mulls over Abbey move'
26 Jul 00 | Business
Abbey aims to change habits
12 Jun 00 | Business
Abbey National launches Cahoot
10 Feb 00 | Business
Bank admits defeat over NatWest
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