View the article online at http://citywire.co.uk/money/article/a404612
Lloyds defends HBOS takeover as shareholders launch £14bn claim
(Update) Shareholder action group launches claim for losses incurred after the acquisition of HBOS - but Lloyds says shareholders will win in the long run.
Lloyds has defended its decision to buy HBOS at the peak of the financial crisis saying shareholders will eventually reap the benefits.
'We believe that the acquisition will deliver significant benefits for our shareholders in the medium to long term. We have a clear strategy in place and are already demonstrating significant progress. We will robustly defend the group’s position in the event of legal action,' a spokesman said.
The comments came after a group of shareholders launched a £14 billion claim against the company over the weekend, saying they were not told the full extent of the financial problems at HBOS when Lloyds bought the bank in 2008.
Lloyds Action Now (LAN) is an association set up by shareholders for shareholders to recover investment losses as a result of the merger of Lloyds TSB Bank with HBOS.
Over the weekend, the group sent letters to the Treasury and to chief executive Eric Daniels and former chairman Sir Victor Blank claiming compensation for investors it says were lured into voting for the 2008 takeover without being told the Bank of England had made emergency loans to HBOS of around £25.4billion.
The group said: 'We now know Lloyd’s directors and advisors, the Government, the Financial Services Authority and the Bank of England (and advisors) were fully aware of the effective bankruptcy of HBoS before the merger but nevertheless promoted it.'
The group said the details of the loan were deliberately withheld from ordinary shareholders.
The group has taken legal advice from leading counsel and experts in the European Court who agree that shareholders have excellent grounds to recover their losses.
But the Lloyds spokesman said the group provided thorough and appropriate information to shareholders about the finances of both HBOS and Lloyds, including the general use of government backed schemes.
'We disclosed the fact of the support. We disclosed the fact that it was significant. We disclosed the fact that if such support was not available, there would be a material impact on the solvency of the business. That was, in the view of the Board, through and appropriate disclosure,' he said.
LAN is one of a number of shareholder action groups promising to pursue the company and the government over the disastrous effect of the acquisition on shareholders.
LAN claims around 800,000 individual shareholders lost money as the bad loans at HBOS took their toll on Lloyd’s profits.
Shareholders have also had to forego dividend payments until 2012 as a condition of European Union approval for the deal.
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