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The BBC's Declan Curry
"No politician is going to want have 9,000 job losses on his hands going into a campaign"
 real 56k

Friday, 23 February, 2001, 14:58 GMT
Lloyds TSB bid under scrutiny

Trade and Industry Secretary Stephen Byers has referred the 19bn takeover bid by Lloyds TSB for its banking rival Abbey National to the UK's Competition Commission.

The decision follows an Office of Fair Trading (OFT) report that examined the likely impact of the takeover on the UK financial sector.

Industry insiders said one reason why Mr Byers may have been reluctant to approve the deal ahead of a UK general election is that the merger could lead to up to 9,000 job losses.


The proposed merger would lead to the elimination of one of the most significant branch-based competitors to the UK's four largest banks

Stephen Byers
One particular competition concern is that about 30% of all the UK's current accounts would be controlled by the new mega-bank.

But Lloyds is determined to stick to the bid, pledging full cooperation with the investigators.

Inevitable consolidation

Lloyds said in a statement that further consolidation is inevitable in a competitive market.

"A combination of Lloyds TSB and Abbey National would provide considerable benefits to Abbey National customers, including a more extensive range of products and services delivered through a wider range of branches," said Lloyds, also claiming that the deal was the best for shareholders.

The commission could ask Lloyds TSB to sell-off significant chunks of its business in order to allow the deal to go ahead.

The commission is bound by rules trying to protect consumers by avoiding any one company dominating more than a quarter of the marketplace.

"The proposed merger would lead to the elimination of one of the most significant branch-based competitors to the UK's four largest banks," warned Mr Byers.

Relief

The news came as a relief to the management of the Abbey National, which was working hard to fend off the hostile takeover bid.

The Abbey National would rather merge with the Bank of Scotland - a deal that has not attracted the in-depth probe of the competition watchdog.

The Abbey National said in a statement that Lloyds TSB cannot proceed with an offer to Abbey National shareholders until the result of the Competition Commission is known.

The pre-conditional offer, announced on 31 January, lapses in the light of the probe.

Investors reacted to the news by selling off shares in banks.

At 1500 GMT, Abbey National was down 30p at 1109p, while Lloyds TSB lost 11p to trade at 631p.

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See also:

12 Dec 00 | Business
Abbey rebuffs new Lloyds TSB bid
14 Feb 01 | Business
The battle for Abbey National
14 Feb 01 | Business
Abbey posts record profits
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