Twelve days ago when the Lloyd’s TSB deal to take over HBOS was agreed, HBOS was valued at £9.8 billion. By close of business on Tuesday 30th September HBOS shares had fallen to a position valuing the company at £6.5 billion. As of last night, HBOS’s share price was 122.4p, while the per-share value of Lloyds TSB’s offer was 188p.
Lloyd’s shareholders, who will have the final say on the deal, are seriously concerned now that Lloyds is paying too much for HBOS. They point out that HOS is twice the size of Lloyds TSB and they appear tp be determined that the deal will not go ahead under its current terms.
While both banks are insisting publicly that the arrangement stands and procedures are ongoing, it is understood by senior figures in the financial world that backroom re-negotiations are already taking place.
The likelihood is that the taxpayer will be required to make up the shortfall between any new and the former valuation of HBOS – they call is ‘a sweetener from the taxpayer’.
The extent to which Gordon Brown has already committed the UK to unusally heavy borrowing (£90 billion) is causing worries about its long term impact on the UK economy. Such anxieties can only be aggravated by the inevitability of additional borrowing requirements following further unanticipated expenditure on ‘sweeteners from the taxpayer’.
