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The BBC's Rory Cellan-Jones
"Consumer groups are already calling for the deal to be blocked"
 real 56k

Wednesday, 31 January, 2001, 17:17 GMT
Lloyds ups stakes in Abbey bid
Abbey National Bank of Scotland and Lloyds TSB logos
Lloyds TSB has bid 19.8bn for Abbey National, escalating the quest for the hand of the former building society.

Lloyds appealed to Abbey National shareholders to back a merger which would create the UK's second largest bank, and allow cost savings of 900m a year to be achieved.

The terms of the deal, which would lead to the loss of 9,000 jobs and merger of 600 branches, are unchanged from those which the Abbey National board rejected last month as "inadequate and uncertain".

In reply, Abbey National, which favours a merger with Bank of Scotland, said it had arranged a meeting with Lloyds chiefs "to give Lloyds TSB an opportunity to explain its proposal".

Neither merger has yet received clearance from UK trade watchdogs.

International growth

Lloyds TSB said its bid offers Abbey shareholders "significantly greater" value than could be achieved by other options available to the former building society.

Peter Ellwood, group chief executive, Lloyds TSB
Peter Ellwood: "Platform for overseas expansion"

A joint Abbey/Lloyds company would be well placed to succeed in a sector which faces increasing numbers of mergers as banks struggle to attract customers and keep up with technological developments, the statement said.

"Further consolidation in UK financial services is inevitable," said Peter Ellwood Lloyds TSB's group chief executive.

"Lloyds TSB and Abbey National will be a leading player in UK retail financial services... whilst providing a stronger platform for overseas expansion."

Branch closures

The branch merger programme, which would not be implemented for at least two years after a merger, would affect outlets situated one quarter of a mile or less away from each other.

Lloyds TSB currently has 2,200 branches, and Abbey National 722.

Further savings would be made from combining head office operations, call centres and e-commerce operations, Lloyds said.

The retention of mortgage brands, including the Cheltenham & Gloucester name, would be reviewed following customer research.

Job cuts

While the deal would cost 9,000 of 100,000 jobs in the combined group, Lloyds claimed union support for the merger as "being in the best interests" of staff at both banks.

It is envisaged that the (job cuts) will be achieved with the minimal compulsory redundancies

Lloyds TSB statement

"It is envisaged that the (job cuts) will be achieved with the minimal compulsory redundancies," Wednesday's statement said.

Lloyds claimed that the experience of its merger with the TSB in 1995 demonstrated its ability to "add substantial value through in-market consolidation".

Moves including the merger of 340 branches allowed Lloyds TSB to reduce its expense base by 400m, the bank claims.

The bank's bid offers 1.5 Lloyds shares plus 260p in cash for every Abbey share.

The merged company would be led by Lloyds executives, with Maarten van der Bergh appointed chairman, and Mr Ellwood chief executive

City reaction

Lloyds also revealed pre-tax profits up an estimated 7% to 3.89bn.

Shares in Lloyds TSB closed 35p, or 4.8%, lower at 700p in London on Wednesday.

Abbey National shares ended 51p, or 4.2%, off at 1167p.

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See also:

05 Jan 01 | Business
Lloyds steps up Abbey interest
15 Dec 00 | Business
Abbey ups tempo in merger talks
13 Dec 00 | Business
Lloyds looks to Abbey shareholders
12 Dec 00 | Business
Abbey rebuffs new Lloyds TSB bid
03 Nov 00 | Business
Bank merger wave
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