London/Paris, May 22 (Reuters): French bank Credit Agricole said it was considering making a takeover bid for UK bank Alliance & Leicester, which analysts said could kick-start a ?6-billion ($11.3 billion) bid battle.
France’s biggest retail bank said on Monday it had not made an approach, but Alliance & Leicester’s shares leapt 10 per cent after Credit Agricole showed its interest.
Alliance & Leicester (A&L) has for many months been seen by analysts as the most likely takeover target amongst UK banks, prompting speculation that Credit Agricole or Spain’s Santander could launch a bid.
Agricole said it was assessing A&L “amongst others, but would note that its evaluation is at a preliminary stage”.
The statement followed a weekend newspaper report saying Agricole had appointed Citigroup to advise it on a possible ?6-billion bid.
A&L shares leapt over 10 per cent after the statement to ?12.63, near their record peak of ?12.77 earlier this month and valuing the bank at more than ?5.5 billion. They had eased back to ?11.75, up 5.4 per cent, while Agricole’s shares were down 1.8 per cent at 29.50 euros, in sharply weaker European stock markets.
“We note their statement,” a spokesman for A&L said. “We’re concentrating on delivering on our business strategy.”
A&L, Britain’s seventh-biggest listed bank, is seen by analysts as attractive for its surplus capital and network of about 250 branches. It made pretax profit of ?548 million last year, has 5.5 million personal customers, a 3.4 per cent share of the UK mortgage market, and business banking and Treasury operations.
But its growth prospects are seen as modest and this morning’s rally took A&L shares to about 15 times this year’s estimated earnings, compared with the European average of under 12 times.
Credit Agricole shareholders, however, said there were no clear synergies from buying Alliance & Leicester.
“The UK banking market is an attractive one, but it is not entirely clear if Credit Agricole will be able to get many synergies from Alliance & Leicester,” said Banque Martin Maurel fund manager Michel Dumoulin.
