BANCO Santander yesterday swooped to make a daring agreed £1.3 billion bid for Alliance & Leicester, sparking immediate speculation over possible further bids for the mortgage bank.
The Spanish giant revealed it planned to merge the former building society with Abbey, which it bought in 2004, creating a business with nearly 1,000 UK branches and a more than 8 per cent share of the savings and personal loans market.
But yester
day the deal – which City observers believe gives Santander control of A&L at a knockdown price – prompted speculation that private equity firms or other banks could launch a counter-bid.
David Cumming, head of UK equities at Edinburgh-based Standard Life Investments, one of A&L's major shareholders with a stake of 2.35 per cent, said: "This is a gorgeous deal for Banco Santander.
"They are acquiring Alliance & Leicester on giveaway terms. Given the potential integration benefits, other banks must surely be reviewing their options. I would be amazed if no one else counters with a higher offer in the next few months."
A&L's shares closed up 53 per cent, or 115.75p, at 335p.
However, analysts said that it would be unlikely that any of the major UK banks could enter the race.
One said: "It is very questionable whether the regulators would allow one of the big UK banks to take over A&L on competition grounds.
"That suggests any rival bid would have to come from outside RBS, Lloyds TSB, HBOS, Barclays and HSBC."
Santander has long been considered a potential buyer of A&L.
But analysts said it had been able to secure a knockdown price after a collapse in A&L's share price, along with the whole banking sector, in the past year as the credit crunch gripped.
Santander is offering one of its shares for every three A&L shares, valuing the target's shares at 299p. Adding a cash dividend of 18p per share, it takes the overall offer up to 317p a share.
The deal comes four years after Santander established a foothold in Britain with the £9bn acquisition of Abbey National.
A Santander spokesman said the deal provided "a good geographical fit", with Abbey strong in the south and north-west of England. A&L is strong on the English south coast, the Midlands, and Northern Ireland.
The spokesman said the deal would also accelerate Abbey's drive into small and medium-sized business banking.
The deal would also increase Santander's UK mortgage market share from Abbey's 9.5 per cent to 12.9 per cent.
However, Santander sources confirmed they would seek to whittle back this increased market share out of "prudence" in the current climate over the coming years.
One insider said: "As well as mortgages, this whittling back would also involve treasury and corporate banking. We would seek to reduce the overall assets by between £20bn and £30bn over a period of time."
A&L deal might be small beer for Spaniards but it is a warning for Big FiveNOBODY has ever accused Banco Santander of lacking ambition.
As such, few should be surprised at its audacious swoop yesterday on British bank Alliance & Leicester, the latter trailing blood in the water from a shattered share price.
Santander is the biggest bank in the eurozone by market capitalisation and the fifth-largest in the world by profit.
Founded in 1857, Santander has 912.9 billion (£728bn) in assets and 1.06 trillion in managed funds.
It has 65 million customers, more than 11,000 branches and a presence in 40 countries.
Clearly, this is no nippy-footed medium-ranking European bank trying to gain size and profile via a British acquisition.
A&L does not even approach being any sort of transformational deal for Santander: rather it is an incremental move in a continuing story of a banking giant's international expansion.
If the A&L deal goes through, Santander will continue to be the sixth-biggest banking player in Britain but with greater strength that it had before.
Santander's solid first bridgehead in Britain was via its £9bn takeover of Abbey National in 2004.
That showed the Spanish bank was prepared to buy at the top of the market as well as the bargain basement.
Even before that it had a longstanding cross-shareholding with Royal Bank of Scotland, helping the Scottish bank out financially with RBS's takeover of NatWest in early 2000.
Insiders say Santander boss Emilo Botin, pictured right, and former RBS boss, Sir George Mathewson, neither known as shrinking business violets, hit it off professionally and personally and felt the link could only help the businesses.
Santander was also part of the RBS consortium that last year took over and carved up Dutch banking giant ABN Amro.
The fact that Santander, like its partners RBS and Fortis, persevered in the teeth of the banking liquidity crisis to acquire ABN shows again that Botin backs his judgment.
Having fully integrated Abbey, A&L would now be a significant further statement of intent to be a thorn in the side of Britain's big five: Royal Bank of Scotland, Lloyds TSB, HBOS, HSBC and Barclays.
As Botin said yesterday: "The acquisition will be a significant step in the development of Santander's UK business."
And Britain's clearers will be aware of the firepower and international banking experience Santander brings to the fray.
The bank is the largest financial group in Spain and Latin America and the third-largest banking group in Portugal.
Through Santander Consumer Finance, it also operates in 12 European countries, including Germany and Italy, and the United States.
In 2007 Santander posted a profit of 9.06bn – a rise of 19 per cent from the previous year.
In Latin America, Santander manages more than $300bn in business volumes, ranging from loans and deposits to mutual and managed funds, through nearly 4,500 offices.
Last year Santander's net attributable income in Latin America rose 27 per cent to $3.65bn.
As one analyst said yesterday: "The big five will not be quaking in their boots at the prospect of an Abbey/A&L tie-up. But they will know the banking group snapping at their bigger heels has a proven pedigree as an efficient competitor."
The full article contains 1053 words and appears in The Scotsman newspaper.
