The Spanish banking giant Santander has announced that it has struck a deal worth £1.3bn to takeover UK’s Alliance & Leicester. Santander will merge A&L with Abbey, which it had taken over in 2004. The deal which will shake up the UK high street is likely to be closed by October. Analysts do not see any resistance since A&L is reeling under severe credit crunch.
A&L’s shares which fell by more than 80% last year, jumped from 219.5p to 325p overnight after Santander’s announcement. Santander has also announced plan for cost savings of £180m a year by 2011. This may result in major job cuts for A&L’s existing work force of 7,000 employees in the UK. Santander had axed 4,000 jobs after taking over Abbey National for £8bn in 2004.
According to acting chairman Roy Brown of A&L, company had to accept Santander’s offer due to the worsening economic conditions. He adds that the board took acute note of external risks posed by the deteriorating economy and remarked that Santander’s UK operations fit excellently with those of A&L.
Santander revealed its plan of reducing the “combined treasury assets” of Abbey and A&L by £20bn to £30bn in the next two years, resulting in minimum exposure to the mortgage markets.
Speaking on a conference call, David Bennett, A&L chief executive, did not rule out job cuts, or deletion of its brand name from high street. With A&L’s 250 branches in UK, the combined total of Abbey and A&L branches will be 950.
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