Banks agree acquisition plan

The Spanish owner of Abbey, Santander, has announced plans to acquire UK bank Alliance & Leicester (A&L).

A statement issued to the London Stock Exchange today by Santander said the acquisition would allow “the combination of A&L and Abbey’s complementary business operations, enhancing the competitive positioning of the products and services offered by the group, benefiting customers”.

The shareholders of both Santander and A&L must vote on the plans before the acquisition goes ahead, with approval being granted by a majority of A&L shareholders representing three-fourths in value of its shares. The Financial Services Authority and the Bank of Spain must also grant merger control approvals and regulatory clearances.

Roy Brown, acting chairman of A&L, 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 external risks presented by the deterioration in economic conditions and the continuing turbulence in the financial markets. Against that background, the proposal from Santander represents value for shareholders and the combination of A&L with Santander's UK operations is an excellent fit.”

Darren Cook, mortgage expert at Moneyfacts, said the deal would briefly bring confidence to the mortgage industry, but also a further reduction in consumer choice. He added: “Historically, mergers in the mortgage market have worked out as more of a takeover of the mortgage book, with one company's product range features disappearing altogether without bringing together the best of both product ranges.”