M&A: Santander to pick up another UK high-street name.

Santander has now finished its absorption of Abbey (formerly Abbey National Building Society that abandoned its mutual status, went public and went spectacularly deficient in the profits department with a lost of almost GBP1 milliard before Santander took it over).

With its expertise at fixing the apparently unfixable, and having stood quietly on one side instead of offering to take over the similarly afflicted Northern Rock (another building society turned bank turned failure) it seemed that Santander might be on the list for the FSA to visit to ask it to take over the latest building society to bank to catastrophe Bradford and Bingley. But now, Santander has its hand in its wallet and its eyes on the Alliance and Leicester – yet another bank turned building society turned – oh, not a failure.

In fact, members of A&L fought a long and hard rearguard action to prevent the management of the company turning A&L into a bank, and surrendering its mutual status. It was one of the best run building societies and one which had remained close to its original ideals. But it has expanded dramatically and rivalled the major banks for the number of points of presence.

A&L shares had been languishing – as are all bank shares in the UK but at around GBP2 pe share, A&L was particularly good value, says some analysts. Clearly Santander thinks so: it has offered GBP317 per share.

But the market seems to think that the offer might have some way to run, as the rapid rise in the share price shows (see table below). Given that even now, the shares are more than 70% below their price a year ago, that argument seems to have some merit.

Detailed Price Data

Share Price Changes

Price History

Source A&L website 20080714 12:13pm