Fleets and leasing chiefs are assessing the potential impact of a massive change in the leasing market after the announcement that Lloyds TSB has agreed to takeover over rival banking giant HBOS in a £12.2 billion deal.
The deal still needs shareholder and regulatory approval, although HBOS executives are recommending it is supported as a good deal.
Among the billions of pounds of assets the companies hold are two of the biggest leasing companies in the country.
Lloyds TSB owns Lloyds TSB Autolease, which has a fleet of more than 129,000 vehicles and HBOS owns Lex, Britain’s biggest leasing company with a fleet of more than 251,000 vehicles.
Bringing the two companies together would create a new leasing giant with more than 380,000 vehicles and with Lloyds TSB looking for £1 billion of savings from the takeover, nothing can be ruled out.
Neither leasing company is able to comment on any potential merger as the announcement by their parent companies was an unexpected result of a chaotic week in the financial markets.
HBOS saw billions of pounds wiped off its value this week amid frantic trading, which saw its share price at one stage collapse to less than £1.
However, new rules introduce yesterday to ban speculators from driving down the price of banks by short-selling – betting heavily on the price of a company falling – saw shares leap today, with HBOS trading at about £2.30, although this is still more than 70% below its 52-week high.
Lloyds TSB is offering 0.83 of its shares for each HBOS share, valuing them at 232p each.
If the deal goes through, as it is expected to, it means shareholders will effectively swap shares in HBOS for ones in the enlarged Lloyds TSB Group.
Despite the fast-paced nature of the deal, it isn’t a certainty.
It still needs to be approved by shareholders and ratified by City watchdog the Financial Services Authority.
HBOS is recommending that its shareholders back the deal and the Government has said it will waive competition rules to get the transaction through on public interest grounds.
Industry consultant Colin Tourick said of the deal: “I was already expecting an increased activity in the mergers and acquisitions market in any event, because of the general downturn in the used car market and the economy.
“If this deal goes ahead, the impact will be very significant. They will be a colossus in the industry and the economies of scale will be enormous.”
Jay Parmar, head of legal services at the British Vehicle Rental and Leasing Association (BVRLA) said: “These are obviously turbulent times for everyone involved in the banking sector, but it is important to remember that vehicle leasing works on secured lending and has a much lower risk profile than many other forms of credit.
“It would be unwise to speculate on any impact this merger may have.
"Our industry has experienced a lot of consolidation over the years, but such changes have not affected the standards of customer service delivered to customers.
“In fact, leasing a vehicle makes perfect business sense during the current economic downturn.
"The customer gets the reassurance of paying fixed monthly rentals and is shielded from falling vehicle values and unforeseen maintenance costs.
"As an alternative to vehicle ownership, leasing frees up a customer’s own capital, which can be invested where it will deliver real value for their business.”