Llyods TSB last week agreed a $22.2 billion deal for HBOS after the company lost half its market value.
Lloyds TSB agreed to pay 232 pence a share in stock for HBOS, 58 per cent more than midweek’s closing price of 147.1 in London trading.
HBOS lost almost half its market value last week, after being badly hit by a shortage of funds to back its mortgages. The company was left in a similar situation to that of Northern Rock.
Now Lloyds TSB and HBOS will have a a 28 percent share of Britain's mortgage market and a consumer banking network with more than 3,300 branches. Both companies earn more than 70 per cent of their revenue from the UK.
Lloyds TSB Chief Executive Officer Eric Daniels will be the boss of the new enlarged company, while HBOS’s Victor Blank will be chairman.
According to a statement, the combined company will add £1 billion in pretax earnings by 2011.
HBOS employs about 72,000 people in the UK and was created in 2001 in the 9.7 billion-pound merger of Yorkshire-based mortgage lender Halifax Plc and Edinburgh-based Bank of Scotland. Lloyds TSB employs about 58,000.
The pressures are mounting worldwide after the collapse of Lehman Brothers and HBOS had been under particular strain.
''It is sad to see HBOS lose its independence in this way, but we needed a good market-driven solution,'' said Richard Lambert, director-general of the London-based Confederation of British Industry. ''Lloyds TSB is a strong, well-capitalised institution, and the new entity will be well placed to withstand the current turbulence.''