LONDON BRIEFING:THERE WAS relief and regret in equal measure this week as the Spanish bank Grupo Santander swept in with its £1.3 billion (€1.63 billion) bid for Alliance Leicester (AL), writes Fiona Walsh.
Relief that at last there is a floor under the share price of Britain's ninth-largest mortgage lender - and regret that the AL board did not bow to the inevitable somewhat sooner.
Had directors accepted Santander's initial approach last December AL's army of over 200,000 individual shareholders would by now have banked upwards of 600p a share instead of the 317p now on offer.
Even more excruciating for the British bank will be the memory of the approach it rebuffed from the French group Credit Agricole back in 2006 when AL shares were standing at £11 a share.
In the credit crunch world, however, 2006 is ancient history - and it is both painful and pointless these days to play the "if only" game. Thus Santander's offer on Monday was accepted with almost indecent haste by the AL board, led by chief executive David Bennett.
The AL chief executive's relief was palpable as he extolled the virtues of the deal, which was hastily put together over the weekend. It offered shareholders "certainty in uncertain times", he said, noting that while there has been much speculation of other offers, this was the only one on the table.
Bennett has been through a particularly torrid time over the past year, having been forced to take several months off work through ill health. In April, AL was dealt another blow when its highly-regarded chairman, City grandee Derek Higgs, died suddenly.
Shares in the group initially surged more than 50 per cent on news of the share-swap deal, which was dubbed a "mercy killing" by some observers. That took the shares above the offer terms on hopes of a rival bid, although the price fell back yesterday.
Santander's bargain-basement terms were greeted with howls of protest from some in the City of London, such as fund manager David Cumming at Standard Life, which owns a 2.35 per cent stake in AL. It was a "gorgeous" deal, he said - for the Spanish.
Santander's offer is not due to close until October, which certainly gives other bidders plenty of time to make a move.
While a bidding war would be welcome news for the beleaguered banking sector, it seems unlikely.
Few banks can match Santander's financial strength and its 73-year-old chairman, Emilio Botin, is rapidly acquiring legendary status in the global banking world. He has largely steered the group clear of toxic subprime assets and Santander remains one of the best-capitalised banks in Europe.
It is also the one bank to emerge from last year's record-breaking ABN-Amro carve-up with its reputation - and balance sheet - enhanced.
In what is widely regarded as one of the best banking deals ever, the shrewd Spaniard bought ABN's Brazilian and Italian banking businesses but swiftly offloaded the Italian operation at a profit of almost £2 billion while retaining the high-growth Brazilian Banco Real.
Even if no rival offer emerges, the Santander move looks set to kick-start the much-mooted consolidation of the banking sector. Although the AL deal is at a rock-bottom price, it serves as a vote of confidence in the industry and offers a welcome show of support for the battered British housing market.
For Santander, the AL deal fulfils its ambition to expand its operations in the UK, where it paid £8.5 billion for mortgage lender Abbey four years ago.
The combination of Abbey and AL will give Santander an expanded branch network and take its share of the UK mortgage market to 13 per cent, second only to the Halifax group HBOS, which has around 20 per cent.
Unlike Abbey, which has been aggressively expanding its mortgage offer, AL has been forced to cut back lending as funds dried up in the wake of the credit crunch. Santander plans to inject £1 billion into AL, restoring it to a sound financial footing.
The deal will come as a relief to Britain's harassed financial regulator and to the government - after Northern Rock and the debacle surrounding Bradford Bingley's cash call, there is now at least one less bank to worry about.
It should also be good news for the moribund home-loan market, and savers too could benefit from sharper rates from the Abbey/AL combination.
But there are likely to be heavy job losses among the combined workforce as head office and branch duplication are eradicated. The Spanish bank intends to slash £180 million from the cost base within three years, which would see job losses running into the thousands.
Fiona Walsh writes for the Guardian newspaper in London
