Lloyds TSB's hand has been considerably strengthened in its bid to take over Abbey National, by Abbey's and Bank of Scotland's decision to break off merger talks, analysts said.
They said the break-off was due to management friction rather than pressure from Abbey shareholders to wait for the outcome of the British Competition Commission's investigation in the hope of getting a higher bid from Lloyds.
The Competition Commission's ruling due on June 12th would be key, as possible link-ups depend on this as it is doubtful that competing bidders for Abbey will appear before the ruling.
Many analysts believe that the break-off leaves BoS vulnerable to a takeover although this view is not shared by all.
"The Abbey, BoS thing was a backstop deal so now Abbey is even more vulnerable to Lloyds," Mr John Tyce of SG Securities said.
"I believe the breakdown occurred because of a genuine conflict of interest. Abbey, which would constitute 60 per cent of the enlarged group, wanted the lion's share of the top jobs." Mr Tyce said adding that this was a rerun of the management friction which characterised the GlaxoSmithKlinemerger.
Mr Alex Potter from Commerzbank said he thinks the decision to call off the merger came from BoS despite the wording of the statement which says Abbey called off the talks.
"It is far more likely that this came from BoS rather than Abbey. BoS were not happy with the whole deal. They have a very strong shareholder ethic. Abbey had no reason to back away but BoS did. They have different styles of management," Mr Potter said.
AFP