Banco Santander has this morning confirmed a takeover to buy Abbey and its associated companies in a deal valuing Abbey at £8.5bn.
Such a deal should create the world’s tenth largest bank by market capitalisation and the fourth largest bank in Europe.
However, any future strategy appears to be based on the scrapping of Abbey’s existing technology set up and the further cross selling of Abbey products.
A statement released by Abbey National plc and Banco Santander says the Spanish banking group will issue one Santander share for every Abbey share, along with an additional dividend payment of 31p in cash per share, based on Thursday 22nd closing price of 578p.
That said, the statement suggests the 31p dividend will be paid by Abbey's own shareholders, as the dividend is expected to be paid prior to completion of the deal on or around November 2nd 2004.
Key to the deal will be the further cross-selling of all types of products to Abbey’s existing customer base, according to Santander, as Banco Santander’s management believes the volume of Abbey products per customer is “well below” many of its UK peers.
“Banco Santander plans to implement some of its consumer finance systems and marketing strategies to grow Abbey’s personal unsecured lending business. On the insurance side, Banco Santander believes it can significantly increase the penetration of general insurance and protection products by more effectively selling to Abbey’s mortgage customer base. In addition, Banco Santander plans to improve the sale of insurance-based investments and pensions,” says the statement.
BS also appears to be hinting at further cost savings within Abbey and the scrapping of Abbey’s existing technology developments as the statement says:“Banco Santander has identified numerous specific cost-saving initiatives and expects significant savings in information technology by eliminating certain systems development projects which overlap with those of Banco Santander. An example would be the core banking system. Banco Santander’s operating philosophy is to invest in customer facing areas whilst extracting maximum efficiency from how it runs the back office.
“The cost savings that will start to materialise from 2007 onwards will be based on a thorough re-engineering of Abbey’s core systems and processes, and will imply significant reductions in the size of middle and back office processing areas, improved productivity in branches and improved use of IT infrastructure,” says the statement.
Most senior executives will stay on at the firm, including Luqman Arnold as chairman who stays until June 2005 if needed, but chief operating officer Stephen Hester will leave the board.
Certificates for New Banco Santander Shares will be issued to Abbey shareholders only if requested while cheques for the special dividend will be despatched no later than fourteen days after the Scheme becomes effective.
Any Abbey shareholder who subsequently receives a like for like swap of Abbey for Banco Santander shares will later be able to sell their shares – providing they have 2,000 or less – over the counter in the branch and without incurring share dealing or foreign exchange commission, according to the trading statement.
Banco Santander is the largest retail bank in Spain with an 18% market share of deposits, 11% share in Portugal as well as operations in Germany, Italy, Scandinavia, Poland, Chile, Mexico and Brazil.
Clarke replacing Balkham
'Deep-dive analysis of client behaviour'
Ways to mitigate April’s increases
The best equity income funds examined