A&L takeover set to secure Mersey jobs

Jul 15 2008 by Bill Gleeson, Liverpool Daily Post

THE Spanish bank that yesterday revealed a £1.25bn deal to buy Alliance & Leicester said it was keen to retain the British group’s Bootle-based commercial banking arm.

The news will offer re-assurance to about 2,000 local people after Santander, which already owns Abbey, was forced to confirm it had struck a deal to buy Alliance & Leicester (A&L) once the news was leaked to the Stock Market.

The takeover, expected to be completed in October, will mean greater financial security for A&L staff. A&L has struggled more than most British banks to raise funds in the current difficult credit conditions. Santander, on the other hand, has no exposure to the sub-prime crisis in the US.

But unions are raising concerns about job losses at high street branches across the country.

A spokesman for Santander said breaking into commercial banking was a long-standing ambition for the group which the A&L deal would help become a reality. The Santander spokesman told the Daily Post: “It’s a very complementary fit to Abbey for three reasons.

“Their branch network is quite complementary to ours, with no great crossover. We have about 700 branches already and they have 250. We announced earlier this year that we wanted to add 300 branches to our network over the next five years. This accele-rates that plan by several years.

“We are also trying to expand into business and commercial banking services for small and medium businesses and this allows us to get into that sector quickly. Expanding into business banking has been part of our strategy for the last 18 months.

“It’s an area we can get into to diversify from traditional mort- gages and savings. Business bank- ing for SMEs is a good natural ex- tension to personal banking. A&L has done that very successfully.

“And then we both offer similar ranges of mortgage and savings products. The three things are very important to us, and the combination makes it a very good strategic move for us.” However, unions remain concerned about the impact on jobs of up to 7,000 A&L staff around the country.

A spokesperson for the Communications Workers Union said: “The obvious concerns about job losses are around high streets where there are both A&L and Abbey branches.

“We are seeking assurances from the company to retain as many positions as possible.

“This is potentially a very serious situation for CWU members. A takeover by any company already active in the UK could mean a potential large number of job losses.

“Staff at A&L deserve to have answers about their future and we urge the company to be up-front about their intentions.”

A&L’s acting chairman, Roy Brown, said the board had recommended the offer “after careful consideration”.

He said: “A&L is a strong and attractive business and its resilient performance is proof of the quality of its franchise.

“However, the board is acutely aware of the significant risks presented by the deterioration in economic conditions and the continuing turbulence in the financial markets.

“Against that background, the proposal from Santander repre-sents value for shareholders, and the combination of A&L with Santander’s UK operations is an excellent fit.”

City investors welcomed the Santander approach. It is the second time this year the Spanish have attempted to buy A&L. The earlier approach was made in January, when A&L’s share price was more than £7. The takeover news sent A&L’s share price rocketing skywards, rising 52% in trading yesterday, closing the day at £3.30.

However, early today reports emerged that a rival bidder for A&L – as yet unnamed – could still emerge.

Carl Cross, an investment director in the Liverpool office of fund management firm Rensburg Sheppards, said: “It makes perfect sense from Santander’s point of view because they are already in the UK market. Now they can buy it at half the price they were prepared to pay six months ago.

“Santander has no US sub-prime exposure. Therefore, it has a clean balance sheet and little likelihood of rival bidders coming forward. It gives them enhanced mortgage and savings market share in the UK, and allows them to cut costs out of the combined business and re-duce their overall expense ratio.” Santander yesterday said it expects the merger of the two UK banks to result in annual savings of £180m.

The Spanish bank is Europe’s biggest bank and the world’s sixth largest by market capitalisation. Its acquisition of A&L would give it an 8% share of the UK savings and personal loans market.

Santander will pump around £1bn extra into A&L to shore up finances weakened by the credit crunch. It plans to scale back the assets of the combined Abbey and A&L businesses by between £20bn and £30bn over the next two years, including reducing the number of complex investments hit by the credit crunch.

At its last update in April, A&L held around £13.7bn in such assets, but has warned that their deteriorating value cost it almost £400m in the first four months of this year.

The company can trace its origins back more than 150 years to the formation of the Leicester Permanent Benefit Society. It demutualised in 1997, joining the FTSE 100 Index.

OPINION: PAGE 10

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