Lloyds get to buy HBOS, HBOS shareholders get something, and first time buyers get a ray of hope
Posted by markharrison on September 18, 2008
Lloyds TSB buying HBOS – well, that news is already nearly 12 hours old…
The deal is worth about £12bn, but HBOS shareholders (including me) are getting 0.83 Lloyds TSB shares for each HBOS share they had. At today’s prices, this is worth about 232p per HBOS share.
Those who bought HBOS at the lowest price of 88p yesterday must be laughing (though a lot will hinge on what Lloyds TSB shares end up being worth when the deal goes through.)
On the flip side, those who bought shares at 275p earlier in the year when HBOS offered existing shareholders a rights issue must be kicking themselves. (I didn’t buy anything at that time, not least because the day I looked, the rights were “under water” – that’s to say, shares were already trading at less than 275p, so I could have bought them cheaper on the open market than through the “special offer”).
But the oddest piece of news today is that the deal was brokered by Gordon Brown at a drinks party on Monday, and that part of the promise is that Lloyds TSB have given the government a pledge that they will keep on lending to first time buyers. In return, the new company will have about 28% of the mortgage market, and the government will waive its right to call in the Competition Commission to investigate (which would normally happen if any company were about to get more than 25% of the market as a result of a merger.)
The saddest new is the politicians who want to turn this into a political issue, and are using soundbites like “Spivs” and “Short-selling” as if the problems in the credit markets were caused by short sellers. The bulk of opinion from economists who aren’t trying to win soundbite games is that MORE short-selling last year might have stopped the bubble that led to the crunch from getting so big, but that point seems to be being lost in the race to find someone to blame. Looks like the legacy of blaming “The Gnomes of Zurich” is still with us.