Negotiation, Negotiation, Negotiation

UK Property Investment news and comments from Mark Harrison of

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.


5 Responses to “Lloyds get to buy HBOS, HBOS shareholders get something, and first time buyers get a ray of hope”

  1. UK Voter said

    Apparantly Gordon Brown was also responsible for all the medals we won at the Olympics, but don’t hold him accountable for the housing bubble, that was all down to the American’s!

  2. I agree that New Labour have taken the credit for lot of things that happened on their watch that were simply because they happened to be in power when things were going well.

    Likewise, I agree that they shouldn’t be allowed to say “nothing to do with us” when things go wrong.

    Sadly, I fear that the credit crunch IS little to do with them… but if they want to take the credit they have to take the blame. If they’d just admitted that the world economy was bigger than any national government, I’d have more sympathy.

  3. john said

    I think the Labour Party and Gordon Brown in particular thought that they would be rewarded for brokering the deal by a huge swing in public favour, which frankly is never going to happen. While our government is hardly to blame for the global credit crunch, as usual allowing the greed to prevail in the City and financial institutions instead of controlling borrowing in the boom years, has shown that they have no more foresight than the average man on the street.

  4. thomas said

    i for one will not vote for a lloyds tsb merger with hbos,gordon brown as said he will not allow any dividend payments from banks who borrow gov money for some time.

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