Q: What happens if Lloyds TSB shareholders reject the HBOS takeover?
One of the few bargaining chips the City still has with the government is in deciding whether to press ahead with the arranged marriage between HBOS and Lloyds TSB. Shareholders in Lloyds have to vote to agree to take over HBOS and may baulk if they feel they are losing too much in the deal. If this happens, the government may have no choice but to take HBOS into full state ownership as it did with Northern Rock and Bradford & Bingley. This would dramatically increase the cost of the bank bail-out to taxpayers and could reignite panic over the solvency of other banks. For this reason, many expect the Treasury will have to reopen negotiations with some leading institutional shareholders over the question of dividend policy.
Interesting, however….it\’s not actually the government in Westminster that gets to decide this.
It\’s the government in Brussels that has already decided this point. Neelie Kroes has said that dividends cannot be paid until the preference shares are redeemed. And that\’s it.
We can negotiate away all we like but unless she changes her mind we\’re stuck with it.