Spanish bank eyes takeover of TSB

Plans for £1.7 billion takeover of TSB

Updated: 
Spanish bank eyes takeover of TSB

Plans for the £1.7 billion takeover of lender TSB have been unveiled in a deal set to increase Spain's interest in the UK banking sector.

The proposal from Barcelona-based Sabadell comes less than a year after TSB rejoined the London stock market in a split from Lloyds Banking Group.

TSB said its board was minded to back Sabadell's 340p-a-share offer and added that new ownership would help accelerate TSB's growth strategy, particularly in small business lending.

Lloyds, which still owns 50% of TSB and has been told to dispose of the remaining stake this year, said it was supportive of the takeover move.

The proposed price will provide a swift profit for the 60,000 ordinary retail investors who took part in TSB's 260p-a-share flotation last June.

It will also boost Spain's hold on UK banking after Santander's acquisition of Abbey, Alliance & Leicester and parts of Bradford & Bingley.

Sabadell, which is Spain's fifth largest bank and has a presence in the United States, pledged to keep the TSB brand name and create a "robust competitor" in UK banking.

TSB said Sabadell would draw on its experience in the Spanish banking market and in small and medium-sized business lending.

Its statement added: "Sabadell believes that the two companies share similar values and customer commitment."

TSB has 8,600 staff, operates 631 branches and serves 4.5 million customers. It recently reported annual profits of £170 million and said 8.4% of all people switching or opening a bank account last year chose TSB.

Sabadell, which operates under several different brands, was founded in Barcelona in 1881 and now employs 17,500 people and has 2,320 branches. It is already well known to Lloyds after buying the company's Spanish division in 2013.

Lloyds - 23% owned by the taxpayer after a bail-out in 2008 - was forced to offload the TSB business under European rules on state aid.

Last year's flotation was more than 10 times oversubscribed and raised £455 million, resulting in TSB's return to the market for the first time since 1995 when it merged with Lloyds.

Talks involving TSB and Sabadell are ongoing but in the meantime shares in the FTSE 250 Index-listed lender surged 25% to 330p.

Banking expert Kebin Ma, of Warwick Business School, said the deal looks good for both parties.

He added: "Banco Sabadell clearly faces the risk that the Spanish economy will remain sluggish for a prolonged period. The bank is not as diversified as Spanish rival Santander, and the acquisition of TSB should certainly help it achieve better diversification.

"From TSB's point of view, the deal is probably more about pure ownership, rather than any change in business model or risk. The offer is very good and the stock market response suggests the deal would create value for shareholders."

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