Halifax-Leeds savers set for share windfall

BY JOHN WILLCOCK

Financial Correspondent

More than 10 million customers of Halifax and Leeds building societies stand to receive free shares worth £500-£700 if they vote in favour of the proposed merger this spring, followed by conversion to bank status in 1997.

Savers who had more than £1,000 deposited when the proposed merger was announced on 25 November last year will get extra shares, pending a court hearing into the deal.

The societies hope they can complete the merger in the summer by winning member approval this spring. The flotation to bank status, which will lead to the issue of free shares, could happen as soon as late 1996, although spring 1997 is more likely.

No figures have been finalised. Assuming the newly formed bank is valued at £8bn-£10bn, borrowers and investors of at least £100 before the cut- off date will receive a share package worth £500-£700.

On top of this basic payment, Halifax and Leeds are planning to give extra shares to investors with deposits above £1,000, up to a limit of £50,000. They will get additional shares on a percentage of their deposits, probably 5-10 per cent.

Assuming the new bank is valued at £8bn and the additional percentage is 5 per cent, this means a depositor with £1,000 in either society before 25 November 1994 will get shares worth £650. If the additional percentage is 10 per cent, say, depositors with £50,000 invested will receive £5,500.

Serge Lourie, spokesman for the Halifax Action group, which claims to have been contacted by more than 500 Halifax customers, attacked the proposals.

Mr Lourie said: "It is a very real problem that if the directors set the company's valuation too low [at the float] and then grant themselves share options, they could make enormous windfall profits."

Mr Lourie said he would like Halifax directors to declare that they will not receive any share options in the first three years of the new bank's life.

He also noted that customers with more than £1,000 invested in the societies must wait until the float, probably in two years, before receiving free shares. "This is locking in their savings for over two years. It's a disgrace. There should be something paid at the point of the merger."

The societies stressed yesterday that huge uncertainties remained over the final figures, depending on the state of the stock market at the time of the float and what the societies were allowed to do under building society legislation. The Building Societies Commission will go to court on their behalf on 20 March to establish whether borrowers and investors of less than two years' duration can receive shares.

The proposed sale of Cheltenham & Gloucester to Lloyds Bank hit a snag last year when the High Court ruled that borrowers could not receive cash. Jon Foulds, chairman of Halifax, said yesterday that the Halifax/Leeds deal would be treated differently because it was a merger, not an acquisition, and involved shares, not cash.

Employees and pensioners of the two societies will also receive the basic distribution of free shares.

Mr Foulds warned yesterday that savers who withdraw cash could risk losing bonus shares. This is because there may be other qualifying dates apart from 25 November 1994 before the deal is completed. These may not be announced in advance.

The chairman also confirmed that both special general meetings for Halifax and Leeds members for the merger vote will be held on the same day.