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Abbey in BoS merger talks
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November 3, 2000: 7:16 a.m. ET
U.K. bank offers to buy rival; BoS gives possible $11B deal a cool response
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LONDON (CNNfn) - Abbey National PLC said Friday it had made an offer to Bank of Scotland PLC to buy its rival, but the Edinburgh-based bank cold-shouldered the offer, saying it was unlikely to pan out.
A deal between Abbey, Britain's sixth largest bank by assets, and BoS, ranked just one place behind, would create a company with a market capitalization of around £23 billion, with combined assets of some $377 billion, ranking it fourth in Britain in terms of assets. Bank of Scotland has a current market capitalization of around £7.5 billion ($11 billion).
 Abbey said it had "made an approach to the board of the Bank of Scotland which may or may not lead to an offer." It claimed it saw "an opportunity to create value for both sets of shareholders by combining the businesses."
It's the second go at a link up for the two companies, but this time the tables are turned. Bank of Scotland told CNNfn.com the company initiated merger talks in July, but Abbey National walked away because they "wished to concentrate on organic growth."
"It seems unlikely that Abbey National's approach will lead to a satisfactory transaction for Bank of Scotland's shareholders," BoS said in a statement.
"One of the key strands of Bank of Scotland is its management. We don't think that the premium Abbey National would have to pay would be justified," said Alex Pagett, spokesman for Bank of Scotland.
Abbey National (ANL) shares jumped 8.4 percent to 1,050.5 pence. Bank of Scotland (BSCT) were up 3 percent to 698 pence in midday London trade, after dipping 3 percent momentarily after the bank's cool response to Abbey's approach.
Any deal would be a continuation of a marked trend toward consolidation in the U.K. financial sector, as the number of major banks has slimmed down considerably in recent years. This summer, Barclays (BARC) bought rival Woolwich for £5.4 billion. Royal Bank of Scotland (RBOS) is in the process of integrating its £21 billion purchase of National Westminster, having ironically beaten off the challenge of BoS to acquire the London-based bank.
News of the possible deal ignited bank stocks in London, driving Alliance & Leicester PLC (AL-) more than 5 percent higher, and Halifax PLC (HFX) up a similar percentage. Lloyds TSB PLC (LLOY) and Royal Bank of Scotland PLC both slumped more than 3 percent as investors guessed who might be the next bank to make a move.
"Certainly there is some unfinished business in the bank sector and the sector is still overpopulated," Reuters quoted a dealer as saying. "These two could be a nice fit in terms of customer base and outlets but a merger might not offer much in cost savings."
Abbey National had itself been seen as a target, with both Barclays and Lloyds TSB, the U.K.'s number three and four banks, believed to have cast their eye over the mortgage lender earlier this year. 
--from staff and wire reports
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