Abbey National, which has said it wants to buy smaller rivals, may face opposition if it tries to pu...
Abbey National, which has said it wants to buy smaller rivals, may face opposition if it tries to purchase takeover candidate Alliance & Leicester, shareholders said.
Alliance & Leicester shares rose 12% to 6 January since 24 December on speculation a rival may try to buy the UK's seventh-largest mortgage lender. The company, with a market value of £4.4bn, is vulnerable because it hasn't had a chief executive since 1999, it missed a revenue target last year, and loses protection from hostile bids in April, analysts said.
London-based Abbey National, which according to one national newspaper approached its Leicester-based peer, is one of the few British banks that could bid without drawing regulators' ire. A buyer may have to pay as much as £5.1bn. That may be too rich for Abbey, which lost 20% of its value in the past year and is expected to suffer a second-half profit decline because of loan losses, Abbey shareholders said.
'They would be criticised,'' said Tom Maxwell, a director at Martin Currie Investment Management, which manages £6.6bn and holds Abbey National shares. 'There's a management credibility issue here.''
Alliance & Leicester shares advanced for a sixth straight day on 4 January, climbing to 867.5 pence, its highest level since 26 November, 1999. Abbey National, last year's worst-performing British bank, was unchanged at 985 pence.
A company would have to pay as much as £10 a share for Alliance & Leicester, about 15% higher than 4 January's closing price, investors and analysts estimated. A buyer would gain about 6 million retail banking customers, about 4% of the mortgage market and 310 UK branches.
The transaction might make sense for Abbey National, which under chief executive officer Ian Harley last year repelled an unsolicited bid by Lloyds TSB Group. Britain's sixth-largest bank needs to get bigger to compete with rivals who themselves have enlarged through purchases, analysts said.
'Abbey National could close most of Alliance & Leicester's network, which would give considerable cost savings,'' said Simon.
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