Lloyds TSB buys HBOS for £12bn

Lloyds TSB has confirmed it is to buy Halifax Bank of Scotland (HBOS) in a deal valued at 12.2 billion.

After a day of speculation, the two banks have confirmed they will link up to form a lender covering around a third of the UK mortgage market.

Lloyds has played down claims that up to 40,000 staff face the axe as part of the deal.

Following government pressure, LLoyds TSB has stepped in to buy HBOS, whose share price has come under severe pressure in recent days over fears about its exposure to the collapsing UK property market.

As speculaton grew, the bank found its borrowing costs rose and the fear it could be running at a loss.

Under the terms of the deal, HBOS Shareholders will receive 0.83 Lloyds TSB Shares for every 1 HBOS Share - valuing HBOS at £12.2 billion.

This is the equivilant of 232p a share - compared to HBOS's closing price of 147.10.

Sir Victor Blank, chairman of Lloyds TSB said: "This will be a unique opportunity to accelerate and extend our strategy and create the UK's leading financial services group.

"Lloyds TSB/HBOS's outstanding franchise will enable it to service more of its customers needs with the balance sheet strength to prosper in challenging markets. This is a good deal for customers and shareholders."

Dennis Stevenson, chairman of HBOS, added: "This is the right transaction for HBOS and its shareholders. Against the backdrop of the very high levels of volatility our industry is experiencing, the combined group will be one of the strongest players in the UK financial services sector.

"In addition, the combined group will have excellent brands and a very powerful franchise. We are recommending our shareholders vote for this transaction."