No merger wave from Abbey bid

Banco Santander's (SCH) €12.5 billion takoever offer for Abbey National is unlikely to herald an imminent wave of cross-border merger and acquisitions (M&A) activity in Europe, according to a historical analysis of such data conducted by analysts, Mergermarket.

"The bid for Abbey by one of Spain's largest financial services groups has been enthusiastically greeted as the harbinger of a wave of cross-border European corporate consolidation, enabling the creation of European champions," the analysts said.

"However, the reality is that, until now, most European governments, as well as companies, have remained resistant to cross-border consolidation."

Mergermarket said that in many cases this is the result of blatant protectionism, but that there are other reasons.

"Earlier this week, for instance, Dresdner Bank, chief executive Mr Herbert Walter said that while he favours more cross-border mergers of financial institutions in Europe, "it is still too early for German banks to actively participate in the process." Mr Walter said that, for now, German banks could accomplish many improvements on their own.

Mergermarket said that the fact that cross-border deals have yet to really accelerate indicates that the M&A recovery has a lot further to go.

Meanwhile, Lloyds TSB, the UK's fifth-largest bank, said it believed a UK bank was unlikely to launch a counterbid for Abbey National because of competition issues.

Yesterday it emerged Abbey had received friendly approaches earlier in the year - including one from Citigroup - as well as one from SCH in April.

SCH shares closed at €7.9 billion, valuing each Abbey share at £5.56. Abbey shares fell by 2½p to 567p, reflecting speculation that a counterbidder could emerge.

Maarten van den Bergh, chairman of Lloyds TSB, said it was a "pity" that Abbey could fall to an overseas bidder, but added the UK government did not appear to back the concept of a national champion in banking.

Lloyds TSB was blocked by the UK Competition Commission from proceeding with an £18 billion bid for Abbey National in 2001.

Mr van den Bergh said the large UK banks would be unlikely to gain Competition Commission approval to proceed with a deal. He said the UK was not supportive of the concept of national champions.