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LONDON (Alliance News) - TSB Banking Group PLC shares rose nearly a quarter Thursday after it received a preliminary GBP1.70 billion takeover offer from Banco de Sabadell, Spain's fourth-largest bank by market capitalisation, a deal that would give Lloyds Banking Group a quick exit route from the remaining TSB holding that it is required to sell.
Lloyds Banking said it would be "minded to accept" the 340 pence per share offer for TSB, the FTSE 250 bank it floated on the London Stock Exchange last year, if a deal can be finalised.
TSB said its board has indicated to Sabadell that it would be willing to recommend an offer at the proposed price, subject to the pair reaching agreements on other terms and conditions of the offer, on which the board has now entered talks with Sabadell.
"Based on preliminary discussions, the Board of TSB believes that Sabadell could support and accelerate TSB's retail growth strategy and accelerate the expansion of TSB's presence in the SME sector," TSB said in a statement.
Lloyds Banking Group, which still owns 50% of TSB after beginning a divestment process with an initial public offering in June 2014 and following up with a subsequent share sale three months later, has until the end of 2015 to sell its remaining stake in TSB under European demands made as a condition of its state-backed bailout during the financial crisis of 2007-09.
"The group is in discussion with Banco de Sabadell SA regarding the terms of an irrevocable agreement and would be minded to accept an offer at this price if it is made, subject to reaching a satisfactory conclusion on the terms above," Lloyds said in a statement.
TSB had already noted that any takeover offer made by Sabadell would require due diligence and backing from Lloyds.
Sabadell is Spain's fourth largest bank by market capitalisation, behind giant Banco Santander SA, which has a sizeable UK unit, Banco Bilbao Vizcaya Argentaria SA and CaixaBank SA. A successful bid for TSB would mark the latest in a string of acquisitions made by Sabadell in the past three years or so.
Between 2011 and 2013, Sabadell was able to take over several Spanish regional lenders, including Caja de Ahorros del Mediterraneo, Banco Gallego and Caixa Penedes, after emerging from the financial crisis, exacerbated in Spain because of the real estate bubble explosion, in better shape than many of its rivals. In April 2013, Lloyds Banking Group agreed to sell its Spanish retail banking operations to Sabadell.
Between 2007 and 2013, Banco Sabadell managed to double its asset volumes, loans and deposits, branch offices network and employees, Sabadell Chief Executive Jaime Guardiola said in a speech in Barcelona in February.
Citigroup and Rothschild are acting as financial advisers to TSB and Goldman Sachs is acting as financial adviser to Sabadell.
TSB shares are trading up by 24% at 328.59 pence on Thursday afternoon, easily the best performer in the FTSE 250 index. Sabadell shares were trading down 7.0% at EUR2.33 in Madrid.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
Updates by Samuel Agini; samagini@alliancenews.com; @SamuelAgini. Additional reporting by Daniel Ruiz; danielruiz@alliancenews.com
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