Halifax Makes Surprise £800 Million Offer for Birmingham Midshires

Strategic Insights -

Halifax, the UK building society, has made a surprise £800 million offer for Birmingham Midshires, a move that could give its 1.24 million members an average £150 windfall. The offer is said to be up to 25 per cent higher than the current suitor, Royal Bank of Scotland's, £630 million offer. The deal would bring the total windfall for members to almost £650 each. However, Birmingham Midshires' board has refused to consider the offer, citing an agreement with RBS and a guarantee to keep staff and branches.

Key Takeaways:

  • Halifax's £800 million offer for Birmingham Midshires is up to 25 per cent higher than RBS' current offer of £630 million.
  • The offer would give Birmingham Midshires' 1.24 million members an average £150 windfall, bringing their total windfall to almost £650 each.
  • Birmingham Midshires' board has refused to consider the offer, citing an agreement with RBS and a guarantee to keep staff and branches.
  • RBS had pledged to keep staff and branches and retain the Birmingham Midshires brand, and had offered a three-year guarantee on employee jobs.
  • Analysts have suggested that an updated valuation on Birmingham Midshires would be between £750 million and £1 billion.
  • The recent sharp rise in retail banking shares has driven up the price of converted building societies, including Halifax itself, Alliance & Leicester and Northern Rock.
  • Halifax believes the society would make a "good strategic fit" and is keen to increase its share of mortgage lending.

Statistics:

  • Halifax's £800 million offer is up to 25 per cent higher than RBS' £630 million offer.
  • The offer would give Birmingham Midshires' 1.24 million members an average £150 windfall (£150,000,000 / 1,240,000 members = £120.97 per member, but assuming an average windfall per member of £150, the total windfall would be £185.15 million).
  • Birmingham Midshires' total assets: Not mentioned.
  • RBS' offer of £630 million is 0.25 (£630,000,000 / £800,000,000) or 20 per cent lower than Halifax's offer.
  • Updated valuation on Birmingham Midshires: between £750 million and £1 billion.

Sources:

  • Copyright (C) The Times, 1998
  • Howard Moody, director of corporate affairs at RBS
  • Mike Jackson, chief executive of Birmingham Midshires
  • Jon Foulds, chairman of Halifax
  • John Leighfield, chairman of Birmingham Midshires