TSB has confirmed it has received a takeover offer from Spanish bank Sabadell, valuing the challenger bank at £1.7 billion.
Banco Sabadell has offered 340p a share for the bank, which is 50 per cent owned by taxpayer-backed Lloyds. TSB, which floated last June for 260p a share, jumped 26 per cent following the announcement, to 333.32p.
Following preliminary discussions, TSB said it would be “willing to recommend” the offer at this price “subject to reaching agreement on the other terms and conditions of any offer”.
TSB said: “Based on preliminary discussions, the board of TSB believes that Sabadell could support and accelerate TSB’s retail growth strategy and accelerate the expansion of TSB’s presence in the SME sector.
“Sabadell recognises the achievement of TSB’s management and employees and would continue to operate TSB as a robust competitor in the UK banking market, building on the TSB brand name.”
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The Spanish banking group, Spain’s fourth-largest private banking group which was founded in Barcelona in 1881, said it believed it could accelerate TSB’s growth and make its operations more efficient, citing “experience gained in the Spanish banking market and SME lending” and a, “track record of successful business and IT integrations.”
The deal would mark a change in direction for TSB, which last week told The Times it was “in the market” for acquisitions itself.
The bank, which split off from Lloyds in June last year, held talks with rival Aldermore last month but they fell apart because the two sides could not agree on price.
The news of the proposed takeover has been welcomed by Lloyds, which said it would be, “minded to accept an offer at this price” subject to certain conditions.
It is understood TSB will come with a £450 million “IT dowry” from Lloyds if the deal takes the challenger bank’s operations off their computer systems, a deal agreed at TSB’s stock market float.
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TSB last month reported a pre-tax profit of £133.7 million for last year, up 2.3 per cent on 2013. Just over half the profits were generated by the portfolio of mortgages that Lloyds Bank has lent to TSB to kickstart its business. The book of mortgages will be returned once they have generated £230 million of profit for TSB.
TSB’s deposits rose 6.6 per cent to £24.6 billion as the bank took one in twelve of new and switching current account customers last year. Its own mortgage book fell by 6 per cent to £18.8 billion.