hbos takeover on track

For those that don't know, about 50% of the VPG debt is with HBOS, and one of the reasons that VPG has dropped is the worry about HBOS..... but it looks like the HBOS takeover is on track :-)

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http://money.ninemsn.com.au/article.aspx?id=659788

Lloyds, HBOS takeover on track
4/11/2008 7:32:01 AM
Lloyds is going ahead with its government-backed takeover of rival HBOS, the two British banks confirmed Monday, as both published third-quarter earnings statements revealing steep declines in profit for the year to date.

Merging, they said, would shore up their balance sheets, reduce their costs and increase their profits.

The deal "is a clear route to creating long term value," Lloyds Chief Executive Eric Daniels said at a press conference in London on Monday. "We will produce superior returns so the value of shareholders' investments will go up."

The banks also said ongoing market turmoil and mounting bad debts had resulted in their profits for the first nine months of 2008 being dramatically lower than they were a year earlier.

HBOS confirmed in a statement Monday that the takeover, which was agreed to in October and is scheduled to be completed in January if approved by shareholders and regulators, was indeed "proceeding according to plan."

The coordinated show of confidence in the planned takeover, dogged by market skepticism, came as both Lloyds and HBOS published disappointing third-quarter earnings results.

London-based Lloyds TSB Group PLC said it had sustained a "substantial" fall in pretax profits for the nine months through Sept 30, including a third-quarter write down in its wholesale and international banking division of STG270 million ($A646.86 million). It did not publish its third quarter profit or revenue figures.

Meanwhile, Edinburgh-based HBOS PLC said it had been forced to write down a further STG732 million of assets in the three months to September 30, largely as a result of the collapse of US investment bank Lehman Brothers and Washington Mutual banks. Like Lloyds, HBOS did not reveal what its profit or revenue had been in the third quarter.

Lloyds' planned STG6.3 billion ($A15.09 billion) takeover of HBOS would help both beleaguered banks shore up their balance sheets.

The British government has been a key proponent of the planned takeover -even suspending anti-monopoly laws to allow it - because the government believes the deal will eliminate the risk of HBOS requiring nationalisation to avoid collapse, as several other British banks have recently.

To encourage Lloyds and HBOS to go through with the deal, the British government has promised to invest as much as STG17 billion ($A40.73 billion)in the banks - on the condition that the takeover is completed. The investment would leave the government owning as much as 43 per cent of the combined company.

"The government views the merger of these two key banks as a big plank in its overall rescue package," said Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers.

In addition to giving the banks new capital, the planned takeover would also result in cost savings of more than STG1.5 billion ($A3.59 billion) annually for the combined company - 50 per cent more savings than previously estimated - Lloyds Chief Executive Daniels said at Monday's press conference.

Daniels did not say how many jobs would be cut following the takeover.

He did say, however, that the bank would resume paying cash dividends to shareholders at some point next year, meaning that it plans to buy back at least 4 billion pounds worth of government investment by the end of 2009.

Shares in Lloyds closed unchanged at 197.80 pence, while HBOS shares gained 6.1 per cent to 105.40 pence on the London Stock Exchange.