Kingel
12 Mar 2015
HL View HL comment (12 March 2015) The brief facts:TSB shares have surged over 20% following an offer from Banco Sabadell of Spain, for Sabadell to acquire TSB for a price of 340p per share, in cash. The TSB Board are minded to recommend the offer, subject to the usual conditions, including former parent, and 50% owner Lloyds accepting the offer too.TSB believe that Sabadell can help them accelerate their retail growth strategy and their expansion into Smaller and Medium Enterprise (SME) business banking. Sabadell for its part will operate TSB as a "robust competitor" in the UK banking market, building on the TSB brand name.Read more share research from Hargreaves LansdownOur view:Sabadell has a current market capitalisation of €9.25bn, rather larger than TSB which is valued at £1.7bn at the offer price of 340p per share. Sabadell reported Tier One capital of 11.7%, a total capital ratio of 12.8% at the end of 2014 and profits of €1.2bn. It expects to finance the offer in a fashion that will have a neutral impact upon its capital ratios. TSB of course has a Tier One ratio of 23%, but is relatively weak in terms of profitability, with profits forecast to be under £100m this year.Much will depend on the attitude of Lloyds and the FCA. As part of Sabadell, TSB will have access to an international network to bolster its business banking proposition. Sabadell may be able to provide the IT know-how and capacity to wean TSB off former parent Lloyds' IT structures. For its part, Lloyds may be reluctant to pass TSB to a predator, if it fears that Sabadell might look to rationalise TSB's cost base as a means to make a return on the deal, which, on the face of it, looks like a very expensive acquisition in terms of earnings multiples.Sabadell is not as strongly capitalised as TSB. The regulator may be wary of allowing it to fall under the control of a larger, but possibly weaker entity, based in a country with ongoing economic challenges.Agreed deals normally go through, but you can be certain that the regulators will want to pore over Sabadell's books with a very fine comb, given the history of Spanish banking in recent years. At present the stock is trading within two or three percent of the offer price, therefore there is very limited upside from here, unless a counter bidder appears. Whereas if Sabadell is shown the door by Lloyds, the Regulator or both, the downside could be significant. All yield figures are variable and not guaranteed.[link]
Hardboy
12 Mar 2015
Re: t/o 340p A lot of people seem to be wondering what happens in the event of the takeover to the bonus shares promised to investors after holding for a year. So I wrote to the Investors Relations, and (given that today must have been pretty busy) a reply was received within a couple of hours. However it tells us nothing. This is what was said: -"Thanks for your email. Unfortunately there is not a great deal we can say at this time given we are in an offer situation. However information on bonus shares can be found on page 259 of the TSB IPO Prospectus, which can be found on Lloyds' website. Here is a link: [link] marks for the prompt reply, 0 marks for informing shareholders if something which must have been discussed before the offer was recommended. Kind regards, Andrew Gillan
Kool Keith
12 Mar 2015
Re: Divi Shares? Bet you're glad you wanted to wait for the yearly anniversary before selling out.
give the dog a bone
12 Mar 2015
Re: Execution Risk A counter bid is highly unlikely because of competition issues ''''''''''''''''''''''''Hmmm ! not so sure about that. Always start with a low-ish offer and then sweeten it with a further upload is first principles of negotiating.
forwardloop
12 Mar 2015
Re: t/o 340p yup you are correct it was 1 in 20[link]
Heorot
12 Mar 2015
Re: Execution Risk Sold today @ 327.2 inclusive of dealing costs. I agree on the integration costs: I was an analyst in the IT team dealing with the integration of RBS & Natwest. Basicly, they threw millions at the project, sucking in most of the available UK IT contractors plus Indian and South Africans. Integrating the Natwest system into the RBS system was like trying to get a quart into a pint pot.
geldman
12 Mar 2015
Execution Risk Lloyds owns 50% of TSB thus will receive approx. £850m at a price of 340. TSB is entitled to a "dowry" of £450m to convert the TSB/Lloyds systems to another bank's systems. When Santander acquired Abbey National the result was 3 years of chaos and appalling customer service, mostly for corporate customers. Santander had the benefit of being led by Nathan Bostock at that time, who integrated RBS and NatWest, probably the most capable banker in London and even he struggled.A counter bid is highly unlikely because of competition issues and the prospect of the IT systems integration turning into a car crash could/may result in profits being held back over 2/3 years.Take the money and run!!
crassus
12 Mar 2015
Re: t/o 340p Can't refuse a 26% gain in one day, so sold. If deal goes through I've left a little on the table for the next man. If it doesn't price will drop and will consider whether to buy in again.
Ripley94
12 Mar 2015
Re: Political and execution risk maybe a better offer.
Spadger
12 Mar 2015
major shareholders According to the TSB website:-Lloyds Banking Group has 50%Majedie Asset Management has 5.12%Jupiter Asset Management has 5.01%I presume that Lloyds has a significant presence on the TSB board but if was me I would be holding out for a second higher offer.
geldman
12 Mar 2015
Political and execution risk The current price of approx 334 represents very good value as an exit price. Lloyds Bank retained a 50% shareholding in TSB on the IPO and TSB still depends, I believe, on Lloyds IT systems. Thus Lloyds, and the UK Government which still owns a 20%+ stake in Lloyds will have a say. Lloyds were forced to sell TSB as a result of the Gov't bail out and, I believe, crystallised a large loss on the IPO. Again I am not sure what costs might be involved if TSB has to develop new systems to break away for Lloyds and the usual chaos that ensues with change to banking systems. Why not let Sabadell bear those costs, not UK shareholders?The time value of money between today and 9th April is nil in current markets and the political and execution risks over the next 6 months over the Election are very substantial. The status of the bonus shares has not been spelt out yet but might not compensate for the fall back in price if the Regulators refuse permission or demand punitive terms.. That said, I am sure the FCA was made aware of the negotiations but have probably not given any opinion on the conditions to be fulfilled if the takeover goes ahead.Good opportunity to realise a decent profit, especially if bought in the IPO with no purchase transaction costs.
farmerdave
12 Mar 2015
Re: t/o 340p 80% out as wellFD
D Wolves
12 Mar 2015
Re: t/o 340p Yes, what does happen to the bonus shares? If I sold half my allocation, would I still get the bonus for the remaining half I retain?
le vin est par
12 Mar 2015
Re: Takeover As with peapodpicker, missed the peak but out at 333, still 28% profit plus original stake now in ISA pot for other opportunities. This wasn't even a dividend payer. Some cheer after SBRY and CNA woes of last year.
stu black
12 Mar 2015
Re: t/o 340p It's 5%, not 10%
