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Lloyds buys Widows for $11B
June 23, 1999: 8:55 a.m. ET

Purchase of mutually owned Scottish Widows seen as prelude to other deals
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LONDON (CNNfn) - Lloyds TSB confirmed Wednesday that it will pay 7 billion pounds ($11 billion) for the financial services company Scottish Widows, and its chairman said more deals are likely -- with speculation centering on a bid for Royal Bank of Scotland.
     If approved, the takeover of Scottish Widows will bring with it a 5 percent stake in Royal Bank of Scotland. Lloyds and Scottish Widows management confirmed Wednesday they had no intention of disposing of the stake.
     Indeed, Lloyds underlined its intention to continue shopping. "This is not the end of the story, and we remain a very ambitious group hungry for further expansion," Lloyds chairman Brian Pitman said. "I don't think you will see us stopping here."
     And banking analysts agreed. "This isn't the big one," David Liston at Capel Cure Sharp in London told, adding that he believes Royal Bank could be the target. "They have made a statement that they won't sell the [Royal Bank] stake, so you have to ask what they are going to do with it," he added. Lloyds could also opt to buy a European continental bank.
     Although analysts generally welcomed the Scottish Widows deal, they did not hide their disappointment that this wasn't the large deal they had hoped for. "It all seems to make sense, but it is not really big enough to get anyone particularly excited," said Stuart Fowler, head of U.K. and European equities at fund manager Dresdner RCM.
     "We definitely look at it positively," Peter Dutton, financial institutions director at Standard & Poor's, told The agency reaffirmed its A1 plus rating for Lloyds following the announcement.
     But Lloyds shares were almost 3 percent lower at 895 pence amid a general sell-off of financial issues, while Royal Bank of Scotland was down almost 2 percent at 1,389 pence. Capel's Liston said some of the pressure on Lloyds shares was due to the market's expectation that the bank may need a rights issue to finance a large acquisition.

     The takeover of Scottish Widows propels Britain's largest retail bank into No. 2 spot in the U.K. life and pension market. It also gives Lloyds a big presence in the independent financial adviser market, which is central to the distribution of pensions and other long-term savings products in Britain.
Regulatory approval awaited

     Lloyds said the takeover would produce annual pre-tax savings of 60 million pounds within three years once the deal has been completed. The deal is subject to approval by Scottish Widows members as well as regulatory authorities. Both parties said they were hopeful of completing the deal by early next year.
     The tie-up will create an asset management operation with more than 80 billion pounds in funds under management. Lloyds will adopt the Scottish Widows brand, one of the strongest in the U.K., to sell all pension, life and other retail investment products.
     "This is a further manifestation of our strategy to become a leader in our chosen markets," said Peter Ellwood, Lloyd's chief executive. "The addition of Scottish Widows . . . will enable us to achieve this aim in the rapidly growing long-term savings and pensions market."
     "In addition, it will enhance our earnings per share from year one," he added.
     Scottish Widows members will on average receive just under 6,000 pounds each if they approve the takeover bid.Back to top
     -- with additional reporting by Reuters


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Lloyds TSB

Scottish Widows

Royal Bank of Scotland

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