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 Sabadell, Spain's fifth-biggest bank, said it planned to grow TSB
into a significant challenger to Britain's "Big Four" lenders --
Barclays, Royal Bank of Scotland and Lloyds Banking Group,
from which TSB was spun off last year.
Sabadell's bigger domestic rival Santander is already the main
challenger to those four after buying Abbey National a decade ago.
Subdued markets at home are pushing mid-sized Spanish banks into
foreign acquisitions.
Sabadell Chairman Josep Oliu said the bank was attracted to Britain
by the strength of the national economy and healthy margins.
"The financial sector in the UK has margins that are acceptable,
similar to the ones that we have in Spain and higher than the ones
that we have in other European countries," he said.
Sabadell said TSB would be better able to grow under its ownership
and the enlarged business could target more deals.
"The challenger bank market is relatively unconsolidated in the UK
and Sabadell believes that this will create opportunities to further
develop TSB's market position over time," it said.
The group will have a number of opportunities if it decides to
accelerate growth through more acquisitions. Sabadell is having to
raise 1.6 billon euros ($1.7 billion) to finance the TSB deal and
the need for further funding could hold it back.
Clydesdale Bank has been put up for sale by its owner National
Australia Bank. New bank OneSavings said this week it would
listen to takeover offers while the government is selling $13
billion of home loans held by bailed out Northern Rock and Bradford
& Bingley
Sabadell is offering 340 pence per TSB share, a 29 percent premium
to their price the day before its approach was announced and
compared with the 260p at which Lloyds sold a first tranche of
shares in June last year.
TSB shares were up 2 percent at 333.6p by 1040 GMT and Sabadell was
up 2.7 percent.
RARE MOVE
Lloyds, ordered to sell TSB by European regulators as a condition of
its 20 billion pounds bailout during the crisis, said on Friday it
had agreed to sell a 9.99 percent stake to Sabadell and entered into
an irrevocable undertaking to sell its remaining 40.01 percent.
Cross-border takeovers have been rare in the banking sector since
the crisis, with bigger banks focusing on slimming down to bolster
their capital and meet tougher regulations.
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Sabadell is funding the deal via a 1.6 billion euro capital
increase, issuing new shares at 1.48 euros per share in a proportion
of 3 new shares for each 11 old ones.
It said the deal is part of its strategy to become more
international and would mean 22 percent of its assets are outside
Spain, up from 5 percent at the end of 2014.
TSB's Pester and Finance Director Darren Pope will continue in their
current roles, the banks said.
Sabadell said it will also provide a strong technology platform for
TSB to use, which could provide cost savings of about 160 million
pounds annually three years after the takeover.
Lloyds, which is providing TSB's technology platform under a 10 year
deal, will pay 450 million pounds to support the migration of the IT
platform to Sabadell.
TSB is currently Britain's seventh biggest lender with 631 branches
and a 4.3 percent market share.
Sabadell, founded in 1881 in north-eastern Spain to serve local
industry, has doubled its size over the past five years and now has
2,220 branches in Spain, serving around 6,500 customers.
In 2001, Chairman Oliu took the bank public, paving the way for
takeovers that turned the bank from a regional financial institution
to Spain's fifth-largest bank.
($1 = 0.6784 pounds)($1 = 0.9355 euros)
(Additional reporting by Elisabeth O'Leary; Editing by Keith Weir)
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