The creation of Lloyds HBOS
Here are a few more details about this extraordinary takeover.
1) The price of Lloyds TSB's takeover of HBOS will be around 280p-ish in shares, valuing HBOS at around £15bn. And the terms will be announced tomorrow, probably at 7am.
2) The government will use the "national interest" clause in the law that created the independent competition authorities to over-ride concerns about the huge market share that the enlarged Lloyds TSB will have. But it may have to use secondary legislation (which wouldn't involve any kind of debate in Parliament) to flesh out this clause, to the effect that the national interest would be served by the imperative of maintaining the stability of the financial system.
3) The reason the government is facilitating the takeover is that depositors and lenders to HBOS were beginning to withdraw their cash from HBOS, following all that downward pressure on HBOS's share price. There were growing concerns in the HBOS boardroom that a climate of fear was being created about its future, that could have led to a funding crisis - or a Northern-Rock style run, on steroids.
4) The enlarged group will be subject to competition law. If it exploits its massive market share in an anti-competitive way, the Office of Fair Trading will come down on it like a ton of bricks. But ministers took the view that consumers interests, in this case, were better served by protecting their deposits, rather than worrying about whether the market share of a beefed-up Lloyds was too great.
5) One part of the UK where there will be significant anger about this deal will be Scotland, because HBOS's totemic head office is in Scotland (though since the credit crunch began, HBOS's chief executive - Andy Hornby - has been spending most of his time in London). There will be a perception that the deal will relocate an important financial powerhouse to London. And that's probably true, in a practical sense, since Lloyds' chief executive Eric Daniels spends most of his time at his office in the City. But here's the curious irony: in a formal sense, Lloyds TSB's registered head office is in Glasgow (though that's not where any of the action takes place).
6) Eric Daniels will remain chief executive of the enlarged group. The future of Andy Hornby is unclear.
I can reveal that both boards have now agreed the takeover, which will be announced tomorrow morning. The price will be 232p per HBOS share in Lloyds shares.
That's a bit less than what both sides shook on 24 hours earlier. I am intrigued to find out how Lloyds managed to screw the price down a bit.