The devil you know

9 November 2008 By George Hay Follow @gfhay

Merging the two banks is not a marriage made in heaven. But by ditching it and reappointing their exchairman, HBOS investors would risk the little they have. They should only consider Sir Peter Burt and Sir George Mathewson if the two can make a properly financed counterbid.

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The former chairmen of Royal Bank of Scotland and HBOS have written a public letter to the HBOS board asking for it to ditch the merger with Lloyds TSB.

Sir George Mathewson and Sir Peter Burt also want be to installed as chairman and chief executive respectively of an independent HBOS, replacing the incumbents Lord Stevenson and Andy Hornby.

In their letter, the Sir George and Sir Peter say that the terms of the Lloyds offer to HBOS shareholders, including 0.605 of a Lloyds share for every HBOS share, "greatly undervalue" HBOS.

They also say that there is "no reason why HBOS could not ask for recapitalisation as a standalone bank".

The letter says that in the absence of HBOS support for their proposal, the pair will canvass HBOS shareholders with a view to requisitioning an EGM to remove Lord Stevenson and Hornby.

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