Spain’s Santander has reached an agreement to buy beleaguered British mortgage lender Alliance & Leicester. It will pay 1.6 billion euros for A&L, which saw its profits fall 30% last year, with the slide expected to continue.
Santander, which is Europe’s second-biggest bank after HSBC, has long been considered a potential buyer of A&L. It has been able to secure a knockdown price after a collapse in its target’s share price in the past year.
A&L’s stock had slumped over 755 in the past year, hit by falling profits, higher funding costs and low growth prospects. Santander’s offer caused those shares to jump to higher than the bid price, indicating investors are hoping for a takeover battle.
Santander plans to combine Alliance & Leicester with Britain’s Abbey bank – which it already owns – to achieve economies of scale and boost profitability. It said the merged group would have nearly 1,000 branches and over 8% of the UK savings and personal loan market.