12th Dec 2008 17:52
HBOS plc
12 December 2008
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTO OR FROM THE UNITED STATES, CANADA, AUSTRALIA, JAPAN OR SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.
Commencement of Open Offer
Posting of Application Forms
Further to the announcement by HBOS on 19 November 2008 relating to the publication of a prospectus (the "HBOS Prospectus") in connection with the new Ordinary Shares to be issued pursuant to the HBOS Placing and Open Offer and the approval by HBOS Shareholders of the Acquisition and the Capital Raising, HBOS is pleased to announce that Application Forms in respect of the Open Offer will today be posted to Qualifying Non-CREST Shareholders. Open Offer Entitlements will be credited to stock accounts of Qualifying CREST Shareholders by 8.00am on 15 December 2008.
The terms and conditions of the Open Offer are set out in the HBOS Prospectus and, in the case of Qualifying Non-CREST Shareholders, the Application Form.
Summary of the Placing and Open Offer
Subject to the terms and conditions of the Open Offer which are set out in the HBOS Prospectus (and, in the case of Qualifying Non-CREST Shareholders, the Application Form), Qualifying Shareholders are being invited to apply to acquire approximately 7.5 billion Open Offer Shares at the Issue Price of 113.6 pence per Open Offer Share, to raise approximately £8.5 billion (before costs and expenses).
To the extent Open Offer Shares are not taken up under the Open Offer, including the Excess Application Facility, or placed with placees other than HM Treasury pursuant to a placing, which may or may not take place, subject to certain conditions, HM Treasury has agreed to acquire such Open Offer Shares at the Issue Price.
Qualifying Shareholders, subject to the terms and conditions of the Open Offer, are being given the opportunity under the Open Offer to apply to acquire Open Offer Shares at the Issue Price on the following basis:
1.3839 Open Offer Shares for every one Existing HBOS Share
An Excess Application Facility will enable Qualifying Shareholders to apply for Open Offer Shares in excess of their Open Offer Entitlement.
The Placing and Open Offer is inter-conditional with the Acquisition such that any Open Offer Shares acquired under the Placing and Open Offer will be cancelled and exchanged for Lloyds TSB Shares pursuant to the Acquisition. The terms of the Acquisition provide that each HBOS Share (including Open Offer Shares) will be exchanged for 0.605 Consideration Shares. The subscription for New HBOS Shares pursuant to the Placing and Open Offer is therefore equivalent to acquiring Lloyds TSB Shares at 187.77p per Lloyds TSB Share. Under the terms of the Lloyds TSB Placing and Open Offer, New Lloyds TSB Shares are being offered to qualifying Lloyds TSB Shareholders at 173.3p per New Lloyds TSB Share.
Before making any decision to acquire Open Offer Shares under the Placing and Open Offer, investors should consider both the HBOS share price and the Lloyds TSB share price in the market at that time, in the light of the the Open Offer Share subscription price of 113.6p per share being equivalent to an implied price of 187.77p per Lloyds TSB Share. HBOS Shareholders who have any doubt about what action to take, should consult their independent financial adviser.
It is expected that Open Offer Shares will be issued at 8.00 a.m. on 15 January 2009.
The Open Offer Shares, which will be cancelled pursuant to the Acquisition, will not be admitted to listing on the Official List or trading on the London Stock Exchange or any other exchange. However, it is expected that the Consideration Shares, to be issued by Lloyds TSB to holders of Scheme Shares (including the Open Offer Shares) pursuant to the Acquisition will be issued on 16 January 2009 after close of trading. Applications will be made to the FSA for the Consideration Shares to be admitted to the Official List and for them to be admitted to trading on the London Stock Exchange's main market for listed securities. It is expected that Admission of the Consideration Shares will become effective, and that dealings in the Consideration Shares, fully paid, will commence at 8.00 a.m. on 19 January 2009.
Company Trading Update
The Company Trading Update issued by HBOS today is set out in the Appendix to this announcement. HBOS regards the information in the Company Trading Update as a significant new factor relating to the information contained in the HBOS Prospectus and it is expected that a supplementary prospectus prepared in accordance with the Prospectus Rules will be published by HBOS in the week commencing 15 December 2008.
Expected timetable of principal events
|
Latest date for receipt of completed Application Forms and payment in full under the Open Offer and settlement of relevant CREST instructions (as appropriate) |
11.00 a.m. on 9 January 2009 |
|
Scheme Court Hearing (to sanction Scheme) |
12 January 2009(1) |
|
Last day for dealings in, and for registration of transfers and disablement in CREST of, HBOS Shares |
14 January 2009(1) |
|
Open Offer Shares to be issued |
15 January 2009(1) |
|
Reduction Court Hearing (to confirm the reduction of capital) |
16 January 2009(1) |
|
Effective Date of the Scheme |
16 January 2009(1) |
|
Admission of New Lloyds TSB consideration shares |
19 January 2009(1) |
Note:(1) These dates are indicative only and will depend, among other things, on the date on which the Court sanctions the Scheme.
The above times and dates are indicative only and may be subject to change. If any of the above times and/or dates change, the revised times and/or dates will be notified through a Regulatory Information Service.
The information contained in this announcement does not constitute a prospectus. Any decision to acquire HBOS Shares under the Placing and Open Offer must only be made on the basis of the information contained in and incorporated by reference into the HBOS Prospectus. The HBOS Prospectus is available on the HBOS website (www.hbosplc.com).
A prospectus relating to the Consideration Shares to be issued by Lloyds TSB pursuant to the Acquisition is available on the Lloyds TSB website (www.investorrelations.lloydstsb.com/ir/homepage.asp).
Capitalised terms used in this announcement but not defined herein shall have the meanings given to them in the HBOS Prospectus.
Contacts
Investor Relations:
Charles Wycks
Director of Investor Relations
+44 (0)20 7905 9600
Press Office:
Shane O'Riordain
General Manager, Group Communications
+44 (0)131 243 7195
+44 (0)7770 544585 (mobile)
shaneo'[email protected]
This document is not for distribution, directly or indirectly, in or into the United States (including its territories and dependencies, any state of the United States and the District of Columbia), Canada, Australia, Japan or South Africa. This document does not constitute or form a part of any offer or solicitation to purchase or subscribe for securities in the United States. The securities referred to in this document (the 'Securities') have not been, and will not be, registered under the United States Securities Act of 1933 (the 'Securities Act'). The Securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act. There will be no public offer of the Securities in the United States.
Dealing Disclosure Requirements
Under the provisions of Rule 8.3 of the Takeover Code (the 'Code'), if any person is, or becomes, 'interested' (directly or indirectly) in 1% or more of any class of 'relevant securities' of Lloyds TSB Group plc ('Lloyds TSB') or of HBOS, all 'dealings' in any 'relevant securities' of that company (including by means of an option in respect of, or a derivative referenced to, any such 'relevant securities') must be publicly disclosed by no later than 3.30 pm (London time) on the London business day following the date of the relevant transaction. This requirement will continue until the date on which the offer becomes, or is declared, unconditional as to acceptances, lapses or is otherwise withdrawn or on which the 'offer period' otherwise ends. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire an 'interest' in 'relevant securities' of Lloyds TSB or of HBOS, they will be deemed to be a single person for the purpose of Rule 8.3.
Under the provisions of Rule 8.1 of the Code, all 'dealings' in 'relevant securities' of Lloyds TSB or of HBOS by Lloyds TSB or HBOS, or by any of their respective 'associates', must be disclosed by no later than 12.00 noon (London time) on the London business day following the date of the relevant transaction.
A disclosure table, giving details of the companies in whose 'relevant securities' 'dealings' should be disclosed, and the number of such securities in issue, can be found on the Takeover Panel's website at www.thetakeoverpanel.org.uk.
'Interests in securities' arise, in summary, when a person has long economic exposure, whether conditional or absolute, to changes in the price of securities. In particular, a person will be treated as having an 'interest' by virtue of the ownership or control of securities, or by virtue of any option in respect of, or derivative referenced to, securities.
Terms in quotation marks are defined in the Code, which can also be found on the Panel's website. If you are in any doubt as to whether or not you are required to disclose a 'dealing' under Rule 8, you should consult the Panel.
APPENDIX
TRADING UPDATE - 12 DECEMBER 2008
The following Trading Update is being provided in anticipation of the launch of the proposed placing and open offer and in advance of the meetings to be held today at the NEC Birmingham, to approve that placing and open offer and acquisition of HBOS plc by Lloyds TSB Group plc.
Group Overview
Since the Interim Management Statement published on 3 November 2008, (the November IMS) the Group has been operating in increasingly difficult market conditions. There has recently been an acceleration in the deterioration in credit quality, and further sharp falls in estimated asset values. In addition, pressure is building on net interest margins due to the significant reductions in UK base rates. Wholesale funding costs, including funds obtained under UK Government guarantee, remain high relative to base rate and by historical standards. Deposit flows have improved with Retail inflow in November.
Divisional Review
Retail
As stated in the November IMS, the Retail net interest margin remains stable relative to that reported for the first half of 2008, but will come under additional pressure due to the impact of recent base rate cuts. There has been a deterioration in the trend in secured lending arrears which, taken together with continued sharp declines in house prices, has resulted in an estimated secured lending impairment charge of £0.7bn for the 11 months to 30 November 2008 (£0.4bn 30 September; £0.2bn 30 June 2008). The estimated impairment charge for unsecured lending arrears is £1.0bn for the 11 months to 30 November 2008 (£0.8bn 30 September 2008; £0.5bn 30 June 2008). In light of the worsening economic climate, trends in Retail impairment charges are likely to come under further pressure.
Corporate
Corporate credit conditions have continued to deteriorate significantly since the November IMS. This has resulted in an estimated impairment charge of £3.3bn for the 11 months to 30 November 2008 (£1.7bn 30 September 2008; £0.5bn 30 June 2008). This charge reflects an increase in the migration of exposures into the higher risk and impaired categories and sharp declines in asset values with a consequent impact on estimated recoveries. These factors are expected to continue to impact results in the short to medium term.
Recent pronounced falls in the estimated valuations of property and other investments have impacted significantly on the value of the HBOS investment portfolio with an estimated loss of £0.8bn for the 11 months to 30 November 2008 (£0.1bn loss 30 September 2008; £0.1bn profit 30 June 2008). Investment valuations are expected to remain under significant pressure in our private equity and joint venture businesses.
Insurance & Investment
Consistent with the November IMS, our Insurance & Investment division continues to make a good contribution to Group results. From January 2009, we will move to offering our personal loan customers a more flexible regular premium payment protection product to protect against accident, sickness and unemployment; this will defer the timing of Group profit recognition in 2009 and later years.
International
The sale of BankWest and St Andrew's Insurance in Australia received approval from the Australian Competition and Consumer Commission (ACCC) on 10 December 2008 and is expected to complete by the end of December 2008. Credit conditions continue to deteriorate in Australia, Ireland and North America and this has resulted in some increase in impairment charges.
Treasury Portfolio
As at 30 November the estimated losses due to market dislocation totalled £2.2bn (£1.8bn 30 September 2008; £1.1bn 30 June 2008), including impairment losses in the Banking Book of £0.6bn (£0.5bn 30 September 2008; nil 30 June 2008).
In light of increasing illiquidity in the markets for asset backed securities (ABS), HBOS has changed the classification of ABS in the Banking Book from Available for Sale (AFS), where they were carried at fair value of £35.4bn as at 31 October 2008, to Loans and Receivables at the same carrying value. Following this change in classification these securities are no longer subject to measurement at fair value, although they will continue to be subject to regular impairment testing.
For the period to 30 November 2008, estimated negative Fair Value Adjustments (FVAs) in respect of the Banking Book totalled on a post tax basis £4.5bn after the reclassification to Loans and Receivables.
Market dislocation losses reflect deteriorating market conditions and credit downgrades, including downgrades to monoline insurers in November 2008. Exposure to monolines calculated on our own internal methodology totalled £1.2bn at 30 November 2008 (£1.1bn 30 September 2008; £0.7bn 30 June 2008).
At 30 November 2008, 84.4% of our ABS portfolio by nominal value was rated AAA, 5.3% AA and 3.1% A, compared to 88.3%, 6.4% and 2.0% as at 30 September 2008.
Financial Services Compensation Scheme (FSCS)
The Financial Services Authority (FSA) has issued draft guidance regarding the levies to be made by the FSCS to enable it to fulfil its obligations and compensate deposit customers of failing banks. Based on the information currently available, HBOS is likely to accrue a charge of around £200m in 2008 in respect of the FSCS levy.
Outlook
Global market and economic conditions, UK recession and increasing unemployment will continue to present a particularly challenging operating and credit environment. Lower interest rates should ease the debt burden but exert further pressure on net interest income. These factors will impact on HBOS capital ratios. However, through the injection of capital and liquidity facilitated by the UK Government, both currently and going forward, HBOS remains confident in its ability to navigate through this difficult period, as it becomes part of the enlarged Lloyds Banking Group.
Contacts
Investor Relations: Charles Wycks
Director of Investor Relations
+44 (0)131 243 5521
John Hope
Director, Investor Relations
+44 (0)131 243 5521
Press Office: Shane O'Riordain
General Manager, Group Communications
+44 (0)131 243 7195
+44 (0)7770 544585 (mobile)
shaneo'[email protected]
Certain statements made in this announcement constitute forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995.
Forward looking statements can be identified by the use of words such as "may", "will", "expect", "intend", "estimate", "anticipate", "believe", "plan", "seek", "continue" or similar expressions and relate to, among other things, the performance of the various business units of HBOS in the near to medium term, the amount by which HBOS expects to write down the value of certain of its assets, the expectations of HBOS in respect of the rights issue, its capital ratios and its dividend payout ratio, the business strategy of HBOS and its plans and objectives for future operations. Such statements are based on current expectations and, by their nature, are subject to a number of risks and uncertainties that could cause actual results and performance to differ materially from any expected future results or performance, expressed or implied, by the forward-looking statement. Factors that might cause forward looking statements to differ materially from actual results, include among other things, general economic conditions in the European Union, in particular in the United Kingdom, and in other countries in which HBOS has business activities or investments, including the United States; the inability of HBOS to hedge certain risks economically; the adequacy of its impairment provisions and loss reserves; and the potential exposure of HBOS to various types of market risk, such as interest rate risk, foreign exchange rate risk, credit risk and commodity and equity price risk. These forward-looking statements speak only as of the date of this announcement. The information and opinions contained in this announcement are subject to change without notice and, subject to compliance with applicable law, HBOS assumes no responsibility or obligation to update publicly or review any of the forward-looking statements contained herein.
Related Shares:
Lloyds