Lloyds Banking Group PLC’s (LON:LLOY) acquisition of HBOS during the financial crisis was a “unique opportunity” for the lender and represented “good value” for shareholders, the high court has heard.
About 6,000 shareholders have brought a £600mln compensation claim against the bank and five of its former directors – including former chairman Sir Victor Blank and ex-chief executive Eric Daniels – for losses stemming from the acquisition of HBOS.
READ: Lloyds 'mugged' shareholders during ill-fated takeover of HBOS in 2008, court hears
The investors allege the bank failed to disclose that HBOS was receiving emergency assistance from the Bank of England when they voted to approve the takeover in November 2008.
Helen Davies, the lawyer representing Lloyds, opened the bank’s defence in court yesterday by arguing that the compensation case was “fundamentally flawed” and “legally unprecedented”.
Davies said the deal, which was announced days after Lehman Brothers collapsed in September 2008, was taken after advice from advisers, which ran to 50 pages.
Richard Hill, the lawyer representing the investors suing the bank, said on the first day of the trial on Wednesday that Blank had been strong-armed into buying HBOS by then Prime Minister Gordon Brown, who promised to wave away any antitrust issues in a bid to get the deal through quickly.
HBOS deal was a good opportunity, Lloyds argues
Davies said the claims were based on “myths and misconceptions” and that the deal presented a good opportunity because before September 2008 it would have run into problems with competition authorities.
The lawyer added that the decision to proceed with the HBOS takeover was a collective board decision.
She said the board had to make an “urgent decision” about whether to proceed with the deal over the weekend of 12 October 2008 as the government was working on a bailout of the entire UK banking system.
Davies presented written evidence from Daniels, who owned 300,000 shares in Lloyds at the time, which stated that the deal presented “good synergies” for investors. He wrote: “A combination of Lloyds and HBOS was therefore highly complementary and would have the leading market shares in multiple product areas.”
Daniels and Blank are named in the case along with former finance director Tim Tookey, former head of retail Helen Weir and former head of wholesale banking Truett Tate. They are all scheduled to give evidence during the trial.