By Ian Walker and David Román
Banco de Sabadell SA on Friday confirmed terms of a GBP1.7
billion ($2.54 billion) takeover of TSB Banking Group PLC and said
it would launch a rights issue to maintain its capital levels.
The two banks said last week that they were talking about a
possible deal and said Friday that both sides had agreed to the
terms of the 340 pence a share takeover.
Lloyds Banking Group PLC, TSB's largest shareholder, said it
would sell a 9.99% stake in TSB to Sabadell and has agreed to
accept the Spanish bank's offer for its remaining 40%
shareholding.
Banco Sabadell, a midsize Spanish lender with a limited
footprint outside its home country, said in a separate statement it
would raise EUR1.6 billion ($1.71 billion) in a rights issue to
maintain its common equity tier 1 capital ratio, a measure of
financial strength, following the deal. It added that the TSB
takeover wasn't conditional on the fundraising.
The Spanish bank said the takeover would allow it to enter what
it believes is an attractive U.K. banking market and that it
expects to support and accelerate TSB's growth. As well as offering
growth opportunities, Sabadell also thinks it can achieve cost
savings in areas such as IT.
TSB was part of Lloyds until June, when Lloyds floated a
minority stake at 260 pence a share. The TSB sale was a condition
of state aid received by part state-owned Lloyds in the financial
crisis. Under European rules Lloyds must sell its entire stake in
TSB by the end of the year.
TSB, a relative minnow in the U.K. banking market, has been
promoted by U.K. politicians as a " challenger bank" to help break
the U.K.'s highly concentrated banking market.
However, TSB only controls around 4% of the U.K.'s checking
accounts, raising questions over whether it can gain enough scale
to take on local retail giants including Royal Bank of Scotland
Group PLC and Barclays PLC. U.K. competition authorities are
currently considering whether the checking-account market is too
concentrated in the hands of a few banks.
Write to Ian Walker at ian.walker@wsj.com
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