WHEN the final question has been asked and answered, probably around lunchtime on Friday, calm will descend on the cavernous and unremarkable halls of the National Exhibition Centre in Birmingham, and apart from a few outstanding legal niceties HBOS will have been consigned to history.
Shareholders gathering in the Midlands for the bank's final hurrah are expected to put on an exhibition of their own, furious at the board's timid surrender to Lloyds TSB which will see the combined group based in London and thousands of jobs lost th
roughout the country.
HBOS says the meeting will go ahead, despite a last-ditch attempt tomorrow to have the government's competition waiver ruled unlawful. Those leading this latest campaign are taking their case to the Competition Appeal Tribunal and insist they are winning support. The case will be heard in London and, with more influential individuals and organisations rapidly adding their voices to what began as a small group of outraged businessmen, it means a few more nail-biting days for the merger partners ahead of Friday's vote.
The consumer group Which? this weekend threw the support of its 700,000 members behind the Merger Action Group (MAG). "If we win, all the bazookas will be firing," says financier Peter de Vink, one of the original campaign group along with architect Malcolm Fraser, fellow financier Tim Noble and Dan MacDonald of MacDonald Estates. "I am extremely upbeat and we are going to give them a run for their money."
But HBOS continues to defy the protesters. Insiders dismiss the MAG campaign and believe the tribunal will do likewise once the government's heavyweight lawyers produce evidence supporting the logic of the deal and its importance to the financial stability of the banking system.
Nonetheless, the MAG lobby will be a foretaste of what promises to be an uncomfortable valediction for Lord Stevenson, the HBOS chairman and Andy Hornby, chief executive, who are blamed for leading two institutions with long histories to the point of oblivion. They will face shareholders on Friday who have not only lost personal fortunes, but are angry that Bank of Scotland in particular has been ruined by the current management's flawed strategy.
Stevenson famously couldn't work out how to pronounce the new company's name when he addressed its first AGM in 2002. "Is it Aitch-bos," he asked, "or H-B-O-S?" Some would say he's been struggling to get to grips with it ever since.
De Vink, who remains confident of derailing the process, says: "The guys running the bank ran it into the ground. Do you think it would be difficult to put a decent management team in situ to replace a totally hapless supermarket executive (Hornby previously worked for Asda] and a banana of a chairman?"
But in spite of the ongoing attempts to retain the bank's independence, the merger – more accurately a takeover – has looked likely to go ahead since it was announced in September. Stevenson will orchestrate events on Friday, hundreds of hands will be raised in opposition, but the big institutional investors will ensure that it is supported. Chancellor Alistair Darling kept repeating when questioned by Scotland on Sunday in Edinburgh on Thursday that "there was no alternative plan".
He was correct. But he didn't elaborate on why the option of nationalisation offered to Royal Bank of Scotland was not also made available to HBOS. Except, of course, that HBOS preferred the partnership with the UK's only triple-A rated bank with access to wholesale markets rather than the dependency of full nationalisation. The board had done a deal with Lloyds TSB following at least two years of flirting with the idea. With the express permission of Prime Minister Gordon Brown, it was able to avoid an otherwise tricky competition inquiry because he was prepared to waive the normal rules. It was a purely commercial decision.
For HBOS, it would provide an escape route from its reliance on wholesale markets that were in retreat, a dependency that had been part of the bank's strategy under Peter Burt and James Crosby and eventually became unmanageable.
For Lloyds the merger opened up the locker to create a superbank with 144,000 employees and a third of the UK mortgage and savings market. Chairman Sir Victor Blank described it as the deal of the century.
But what none of the parties expected was the depth of opposition that would arise in Scotland, including a vocal lobby who persisted with the idea that it was more to do with the union than commerce.
That opposition was initially encouraged by an unconvincing attempt by the former HBOS executive Jim Spowart to provide a counter-bidder. The City was sceptical and the shares' failure to respond showed that he was given little credibility. Had there been a spike in the price, the Takeover Panel would probably have ordered Spowart to put up or shut up. He chose to shut up.
The campaign baton switched to Burt and Mathewson, formerly of Bank of Scotland and RBS respectively. But they threw in the towel when Darling expressly ruled out any renegotiation of the terms of the bailout.
Tomorrow's hearing by the Competition Appeal Tribunal will be the last faint hope of killing the merger. It opens in London, but because it will be heard under Scots law it would mean that any appeal would go to the Court of Session.
The legal process, in which consultation has been limited to 24 hours rather than the normal two to three weeks, will be completed by Tuesday.
While sceptics in the City doubt its chances, the action group remains confident of a favourable decision by the tribunal, which has the power to refer the merger to the Competition Commission or make recommendations of its own.
MAG claims that Business Secretary Lord Mandelson's approval of the merger without reference to competition law was unlawful. There is a further claim – and one central to many opponents to the merger – that the Government's subsequent £37bn bailout of the banks should override any need for the tie-up with Lloyds TSB. It simply "changed the rules of the game", said one observer.
HBOS says MAG's case is a distraction and has "no merit" and the shareholder meeting will not be deferred whatever the outcome. Counsel for Lord Mandelson, for HBOS and for Lloyds TSB say they want a quick judgment.
Appeals against mergers are unusual, with just four out of 600 mergers going to appeal since 2002. Only three have gone to full tribunal and there has been just one appeal against a decision by the Secretary of State. The almost certain likelihood is that this one will be thrown out once the judge has heard evidence that the Bank of England and Financial Services Authority back the Treasury. Even if the campaigners win, the Secretary of State would appeal or simply restart the process, making it "judgment-proof".
MAG, which has engaged a Brussels-based Scots advocate and competition law specialist, Ian Forrester QC, to lead the appeal, is winning moral and legal support for its case. But the outcome remains weighted in favour of the Lloyds TSB deal going ahead, amid suggestions that the Government may have "owed" Lloyds after the debacle of Northern Rock in the summer of 2007 when too many Government-inspired obstacles prevented it acquiring the Newcastle-based bank.
While the HBOS campaigners maintain a glimmer of hope, it is worth noting that this was a bank whose creation prompted a similar outcry and near ridicule. At that first AGM six years ago, the shareholders rose one by one to let rip on everything from an annual report that resembled a "seed catalogue" to the failure of the directors to wear corporate ties. The name was criticised for not including the word "bank", the reception staff for wearing "ridiculous caps" and the executives for "cynically" timing the announcement of a charitable foundation to counter bad publicity surrounding executive bonuses.
As one publication stated at the time: "Nobody had planned for this when Bank of Scotland and Halifax pulled together the 'new force' in British banking."
This is the bank that they now want to defend. But it looks like another "new force" is about to be created, hopefully without the silly hats.
The full article contains 1388 words and appears in Scotland On Sunday newspaper.
