Lloyds TSB is coming under increasing pressure to attempt to renegotiate its planned takeover of HBOS as leading shareholders press it on the widening difference between the value of its offer for the bank and HBOS' plunging share price.
Lloyds chief executive Eric Daniels said: "Market conditions areobviously difficult but the acquisition of HBOS remains a fantastic opportunity to create the UK's leading financial services group and to create great value for both sets of shareholders."
HBOS shares sank almost 14 per cent yesterday on speculation that Lloyds would renegotiate the price of its all-share offer for Britain's biggest mortgage lender. Lloyds shares rose 4.3 per cent to 226.5p.
The closing share prices valued Lloyds' offer at 188.7p a share. HBOS' shares closed at 122.4p, a massive 35 per cent discount to the value of the deal, indicating severe market fears that the transaction will not go ahead or will be changed to favour Lloyds.
When the takeover valued at about £10 billion ($26.6 billion) at yesterday's close was announced two weeks ago, some HBOS shareholders said the bank had sold out too cheaply.
But with markets in panic about the US's ailing US$700 billion ($1 trillion) financial bailout and fears increasing about banks' capital and funding, pressure has built on Lloyds to seek a lower price.
Cazenove analysts said that Lloyds should write down HBOS assets promptly. It said the terms of the deal could change, echoing Credit Suisse analysts who have said the deal is not a good one for Lloyds despite more than £1 billion of cost savings.
Renegotiating a takeover price is highly unusual because to trigger a "material adverse change" clause requires a catastrophic event.
