Botin dollar

26 July 2004

It is no real surprise the Spanish haven t been overgenerous. This isn t really a costcrunching merger. Santander will be banking on investors postM&S not wanting to see another big bid slip away. Oh, and rival bidders not stepping in.

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Banco Santander Central Hispano has agreed to buy Abbey National for about £8bn in shares and cash.

The Spanish bank will offer one of its own shares and 25p in cash for each share in Abbey. The UK bank's shareholders will also be entitled to retain a further 6p by way of a dividend.

On the basis of Santander's closing price on 23 July, the bid values Abbey at 560p a share, or £8.1bn.

Santander said it expected to extract E560m (£373m) of synergies from the deal, of which E450m would come from cost reductions and E110m from revenue enhancements.

The cost savings will partly come through cutting central costs and some back office functions, such as processing. The remainder will come from moving Abbey's IT systems onto Santander's platform.

Abbey's chief executive, Luqman Arnold, has agreed to stay on till June 2005, if required, to oversee the transition. Stephen Hester, finance director, is leaving the company.

Abbey has agreed to pay a break fee of E130m to Santander should it recommend a bid from a third party.

On the day Arnold arrived at Abbey in October 2002, its shares closed at 623p. His appointment prompted Bank of Ireland to withdraw a £10.3bn takeover offer on the same day.

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