Under the terms of the deal, HBOS shareholders will receive 0.83 Lloyds TSB shares for every one HBOS share they own.
Lloyds TSB’s share price closed September 17 at 279.75p, so it values HBOS at 232p per share.
Existing Lloyds TSB shareholders will own approximately 56% of the issued share capital of the new firm and existing HBOS shareholders approximately 44%.
Lloyds TSB’s chairman Sir Victor Blank and its chief executive Eric Daniels will continue in their respective roles as part of the new group.
But there’s no mention of what HBOS chief executive Andy Hornby’s role will be at the new firm.
It brings to conclusion a roller-coaster week for HBOS – at one point on Wednesday its share price plunged to a paltry 88p per share.
Its share price picked up on the back of the revelation that HBOS was locked in takeover talks with Lloyds TSB, closing at 147p per share.
In terms of the new mega-company’s combined share of the mortgage market, Moneyfacts estimates that it will be in the region of 30%.
And it has a whopping seven mortgage brands to target the market with – Halifax, Lloyds TSB, Cheltenham & Gloucester, BM Solutions, Scottish Widows, Bank of Scotland and Intelligent Finance.
Blank says: “This will be a unique opportunity to accelerate and extend our strategy and create the UK’s leading financial services group.
“Lloyds TSB/HBOS’s outstanding franchise will enable it to service more of its customers needs with the balance sheet strength to prosper in challenging markets. This is a good deal for customers and shareholders.”
Dennis Stevenson, chairman of HBOS, says: “This is the right transaction for HBOS and its shareholders.
“Against the backdrop of the very high levels of volatility our industry is experiencing, the combined group will be one of the strongest players in the UK financial services sector.
“In addition, the combined group will have excellent brands and a very powerful franchise. We are recommending our shareholders vote for this transaction.”