Scots bid to rescue HBOS from takeover

Top bankers launch boardroom coup

TWO of Scotland’s most prominent bankers yesterday launched an audacious coup to take control of troubled HBOS.

Sir Peter Burt and Sir George Mathewson have demanded the resignation of HBOS chairman Lord Dennis Stevenson.

In a bid to halt the proposed merger with Lloyds TSB, they will attempt to force a shareholders meeting to remove Lord Stevenson and chief executive Andy Hornby if they refuse to stand down.

In an exclusive interview with The Scottish Mail on Sunday, Sir Peter said he had also received a “personal” letter from Chancellor Alistair Darling confirming HBOS will still be entitled to £11.5 billion of Government money if it remains independent.

Sir Peter claimed that shareholders were “sleepwalking into a deal” with Lloyds TSB, adding: “Lloyds rode to HBOS’s rescue on a black horse, but it now turns out the two hind legs were broken.”

The surprise intervention by Sir Peter and Sir George, respected former chief executives of the Bank of Scotland and the Royal Bank of Scotland, has raised new hopes the Edinburgh-based bank may avoid mass job losses and retain key decision-making functions.

Last night, opponents of the proposed Lloyds deal said it was now “dead in the water”. But Lord Stevenson said an HBOS board meeting had “unanimously rejected the bankers’ demands.

Sir Peter, 64, said he and Sir George, 68, needed the support of only 10 per cent of shareholders to force an extraordinary general meeting before an HBOS vote on the takeover takes place on 12 December in Birmingham.

He said they would begin canvassing shareholders this week to demand the resignations and had launched a special website to win support.

For the bid to topple Lord Stevenson and Mr Hornby to succeed, it will need the support of major HBOS investors such as Edinburgh-based Standard Life, which has a 3 per cent stake.

Sir Peter revealed he has already had several meetings with the Treasury, saying: “They make it very clear that, in the event of HBOS continuing as an independent business, it would be treated on a strictly level playing field.”

He said he and Sir George were being advised by the boutique investment bank Fairfax. Last night, the Treasury indicated it would not stand in the way of the bold move by the two bankers. A spokesman said: “We are not averse to any particular status for HBOS. Our only interest is in financial stability.”

Sir Peter for CEO

In a scathing letter made public yesterday, Sir Peter and Sir George urge Lord Stevenson and Mr Hornby to resign immediately — to be replaced by Sir George as the new chairman and Sir Peter as chief executive.

Sir Peter said they first discussed their plans just days after the decision by the Government to bail out three major British banks on 13 October.

Sir George, a member of First Minister Alex Salmond’s Council of Economic Advisers, said: “We do not believe the alternatives to the Lloyds takeover of HBOS have been properly explored. That deal is no longer the proper deal for the shareholders of HBOS or anybody else.”

The letter expresses the two bankers’ anger at the prospect of HBOS being sold to a “smaller competitor bank whose management has fared little better during this crisis.”

It adds that the deal “should have been obsolete” within days of the Government announcing it would inject billions of pounds into the banking sector in mid October. A copy of the letter was also sent to First Minister Alex Salmond, who said he would give its contents “the most careful consideration”.

Mr Salmond added: “They are the two outstanding figures in the Scottish financial sector over the last generation and their views command great respect.”

Nationalist MSP Alex Neil, who is involved in putting together a rival bid for HBOS, brokered by Scottish financier Jim Spowart and due to be announced this week, said: “The intervention by Sir Peter and Sir George is good news for HBOS shareholders, Scotland and consumers — and suggests the Lloyds deal is now dead in the water.”

Last night, Mr Spowart welcomed Sir Peter and Sir George’s intervention. He said: “I fully endorse their move.”

This article, bylined Ian Fraser and Michael Tait was published in the Scottish Mail on Sunday on 9 November 2008