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Alliance And Leicester Gets The Abbey habit

The board of Alliance and Leicester has been heavily criticised by many in the City after accepting a takeover offer for Banco Santander, the Spanish parent company of UK based Abbey. The move, which values the bank at just £1.25 billion against over £5 billion a year ago, seems on the surface to be a very good price for Santander and not such a good deal for shareholders, but is that the real picture?

While it has to be said that the deal seems to value the group at only a fraction of its recent high, we are in a very different banking environment at the moment, a time when smaller banks are looking to the support of larger parent groups - Alliance and Leicester is no different. There has been no rumour of immediate trouble at Alliance and Leicester, something which may have prompted such a low price, but the situation is definitely getting worse for all smaller UK banks.

There is speculation that the group may see another bidder(s) entering the fray if the offer is not increased by Banco Santander. However, it looks near inevitable that yet another major UK financial institution is set to fall into foreign hands. The position is also looking grim for the thousands of workers employed by Alliance and Leicester with significant scope for cost cutting and amalgamation with the array of services and products offered by the larger Abbey.

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