ALLIANCE & LEICESTER shareholders received voting packs last week on its proposed takeover by Banco Santander, the Spanish banking giant that owns Abbey.

Each of A&L’s 564,000 shareholders will have until September 16 to decide on the £1.3 billion bid, which would see A&L merge with Abbey.

The board has unanimously recommended that shareholders vote in favour of the takeover.

Roy Brown, the acting chairman of A&L, said in the 254-page voting pack: “The proposed acquisition would bring together in the same group two well known UK banks and create a more effective competitor in UK financial services.”

So, what should shareholders consider before the vote?

If the deal goes ahead, A&L ordinary shareholders will receive one new Banco Santander share for every three A&L shares.

A&L will pay an interim dividend of 18p a share to those who held shares at the close of business on September 5. That payment will be made four days before the proposed takeover date of October 10.

Experts say, however, that the takeover is not a great deal for investors.

A&L shares reached a high of £11 two years ago, and the Spanish bank’s bid values A&L at just 335p a share. This factors in the 18p dividend.

“A&L shares have been on brokers’ sell list for a number of months,” said Richard Hunter of adviser Hargreaves Lansdown.

Brown has said that A&L faces “significant external risks” – from the slowdown in the economy and continuing turbulence in financial markets.

A takeover by Santander would link A&L with Europe’s second-largest bank after HSBC. Santander has operations in Latin American economies, which also helps spread risk from western Europe.

For those with a large number of shares, the takeover could help diversify their portfolio, giving access to a “well respected overseas bank”, said Hunter.

However, he added: “For someone with only a few shares, you may consider selling them for practical reasons. Buying into European shares means the commission you pay will be higher when you sell and there’s also an exchange-rate risk.”

If shareholders sell before September 5, they will not be entitled to receive the interim dividend. Those who want to vote by post need to ensure their forms are received by September 14.

Votes are not being accepted by fax or e-mail, but you can vote online at alliance-leicester-shareregistrars.co.uk.

Shareholders can also vote in person at an extraordinary meeting due to be held at the International Convention Centre in Birmingham on September 16.

The acquisition will take place if the majority of A&L shareholders vote in favour and the majority holds 75% or more of the total value of A&L shares.

There will also need to be regulatory approval before the deal gets the green light.

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