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Lloyds mulls Abbey plan
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December 8, 2000: 7:07 a.m. ET
U.K. bank seen offering mortgage lender Abbey National new takeover bid
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LONDON (CNNfn) - As Lloyds TSB PLC weighed its next step after Abbey National PLC spurned its estimated £17 billion ($24.6 billion) takeover proposal, analysts said Friday they expected the bank to make another offer for Britain's second largest mortgage lender.
Lloyds said it was "considering options", but believes a "combination of Lloyds TSB and Abbey National would be in the best interests of both companies and their respective shareholders, customers, and employees."
 Abbey National, which is already in merger talks with Bank of Scotland, rejected Lloyds' offer a day earlier, saying it was "unattractive" and that it didn't plan to enter talks with the bank.
"The clear signal is that they (Lloyds) are not simply going to walk away," Michael Lever, banking analyst at HSBC Securities, told CNNfn.com
Lever and other analysts said Lloyds was likely to come back with another offer of around £13 per Abbey share, valuing Britain's fifth-largest bank at some £18.6 billion, an 18 percent premium to its value as of its Thursday closing price. Another rejection by Abbey might then lead to a hostile takeover offer.
Analysts have said Lloyds' initial proposal, which it didn't make public, was to buy Abbey for about £12 a share.
 Shares in Abbey (ANL) were up 0.2 percent at 1,110.25 pence by midday Friday, while Lloyds (LLOY) dipped 0.5 percent to 642 pence and Bank of Scotland (BSCT) slipped 0.1 percent to 690.50 pence.
Abbey and Bank of Scotland have returned to the negotiating table after a first round of talks broke down in July. Merging the companies would create a company with a market value of around £29 billion ($42 billion). A Lloyds-Abbey tie-up could be worth about £51 billion.
Analysts have said that combining Lloyds and Abbey would mean bigger cost savings than would be possible if Abbey and Bank of Scotland get together, because Lloyds has more overlap with Abbey in their mortgage and current account businesses.
Antitrust issues 'not critical'
That overlap, and the expanded market share of a Lloyds and Abbey merger, could draw the attention of British antitrust regulators, but analysts say they would be unlikely to block such a deal.
While Abbey and Lloyds together have about 23 percent of outstanding mortgage balances, James Eden, a U.K. banking analyst at Deutsche Bank, said that shouldn't pose a problem since the U.K. mortgage market is "so blatantly extremely competitive."
"Regulatory hurdles, at the end of the day, are likely to be overcome," HSBC's Lever said.
An Abbey deal, either with Bank of Scotland or Lloyds, would be the latest in a string of mergers in Britain's financial sector. Barclays PLC (BARC) bought rival Woolwich for £5.4 billion in August and Royal Bank of Scotland (RBOS) is in the process of integrating National Westminster, which it bought for £21 billion in February after beating out the challenge of Bank of Scotland to acquire the London-based bank. 
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