Spanish lender Sabadell clinched Friday a £1.7-billion takeover of TSB, a unit of Britain’s bailed-out lender Lloyds, marking its entry into the UK retail banking sector.
The two banks announced in a statement that they have agreed terms on the bid which was pitched at 340 pence per share and worth 2.3 billion euros or $2.5 billion.
The takeover strengthens Spain’s hold on British banking following rival Santander’s acquisition of Abbey, Alliance & Leicester and parts of Bradford & Bingley.
“The boards of directors of Banco de Sabadell S.A. and TSB Banking Group plc are pleased to announce that they have reached agreement on the terms of a recommended cash offer for TSB by Sabadell,” the pair said in a statement.
Lloyds, which is 23-percent state-owned after a bailout at the height of the global financial crisis, will sell its remaining 50-percent stake in TSB, which it floated on the London stock market nine months ago.
The announcement means that investors who bought the stock at the offer price of 260 pence will receive a 31-percent premium.
The Spanish bank described the deal as “strategically attractive” and added that it marked a “continuation of Sabadell’s successful growth strategy” to expand globally.
It said the acquisition would bring benefits through enhanced scale and a broader funding and capital base.
“Sabadell believes that the UK banking market, including the market serving UK retail and SME (small and medium-sized enterprise) customers, is attractive, having a well-defined and stable regulatory framework, consistent profitability and good future growth prospects.”
It added that “TSB will be able to further enhance its growth strategy and efficiency, benefiting from Sabadell’s resources, experience in SME lending and experience gained in the Spanish banking market”.
Sabadell also launched plans to raise 1.6 billion euros via a rights issue to shore up its balance sheet, but stressed that the takeover was not conditional on the move.
The deal remains subject to approvals from British regulatory authorities, shareholders and the European Commission.
“Today’s offer by Sabadell to acquire TSB is a real vote of confidence in TSB, our 8,700 employees and the straightforward, transparent approach we’re bringing to banking in the UK,” said TSB Chief Executive Paul Pester, who will continue in his post.
“I’m looking forward to working with Sabadell to continue to bring great banking to consumers across Britain, accelerate the expansion of our services to business customers and to continue to bring more competition to UK banking.”
The announcement comes one week after the Barcelona-based bank confirmed its takeover plans.
As part of its turnaround strategy and in order to meet European Union state aid rules, Lloyds relaunched TSB as a standalone lender in 2013, rebranding more than 600 branches ahead of its IPO in 2014.
Lloyds had been obliged to dispose of its remaining TSB stake by the end of this year.
“I am delighted to confirm we have agreed terms for the sale of our remaining stake in TSB to Sabadell,” added Lloyds Chief Executive Antonio Horta-Osorio.
“This is a significant and positive step for the Group and will enable us to meet our commitments to the European Commission, well ahead of its mandated deadline.”
The offer represents a premium of 29 percent to TSB’s closing share price on March 11, one day before the two groups revealed Sabadell’s approach.
The Spanish lender added that potential savings of £160 million a year could be made through a switch over of IT systems to Sabadell’s own platform. Lloyds will also provide £450 million to support the transition.
Sabadell is Spain’s fifth largest bank and also has a presence in the United States. TSB is the eighth biggest lender in Britain, where it has 631 branches and 4.5 million customers.