LONDON - Abbey National PLC, Britain's No. 2 mortgage lender, has abandoned merger talks with Bank of Scotland as it waits to see whether regulators will clear the $25.4 billion takeover offer from Lloyds TSB Group PLC.
Abbey National and Bank of Scotland had been discussing a combination since November. The talks were complicated by Lloyds TSB's two unsolicited bids for Abbey.
The United Kingdom's Competition Commission has until June 12 to decide whether to approve Lloyds TSB's acquisition proposal.
"Once Lloyds' bid was referred, no one was going to allow Bank of Scotland to merge with Abbey," said Alan Beaney, a fund manager at Principal Investment Management Ltd., which owns shares of Lloyds TSB, Abbey National, and Bank of Scotland.
Shareholders were unlikely to approve a merger between Abbey National and Bank of Scotland while Lloyds was on the sideline, Mr. Beaney said. A Lloyds-Abbey merger would offer more cost-cutting opportunities than an Abbey-Bank of Scotland merger because Lloyds and Abbey National have broader areas of overlap, he said.
Analysts said termination of the merger talks may make it easier for Lloyds TSB to buy Abbey National and make Bank of Scotland vulnerable to takeover by such companies as National Australia Bank or Barclays PLC..
In a press statement distributed by the London Stock Exchange, Abbey National said it called off the negotiations because of "continuing uncertainty created by Lloyds TSB."
Alistair Ross, a spokesman for Bank of Scotland, said Scotland's No. 2 bank is "disappointed with this development and still believes in the compelling nature of a combination with Abbey National."
Bank of Scotland and Abbey National had not announced the terms of their proposed combination, which would have created a company with a market value of $38.3 billion pounds.