LONDON — Lloyds TSB Group PLC said Thursday it has agreed to acquire U.K. mortgage lender HBOS PLC in a landmark deal that would change the face of U.K. banking.

Under the deal, HBOS shareholders will receive 0.83 Lloyds TSB shares for each share they own. The offer values HBOS at GBP12.2 billion ($22.2 billion), based on Lloyds' closing share price on Sept. 17 of 279.75 pence, the companies said. HBOS shareholders will own 44% of the combined group, which will continue to be managed by Lloyds TSB Chairman Victor Blank and Chief Executive Eric Daniels will remain keep their posts in the enlarged group.

In the statement, Lloyds said the deal will bring cost synergies "significantly in excess of GBP1 billion a year by 2011, partly through eliminating branches where these exist close to each other, which in turn will help annual earnings per-share accretion of 20%, also from 2011."

The group employs over 130,000 people combined, but in its statement Lloyds said little about what cuts may be expected, other than that "management focus is to keep jobs in Scotland."

Lloyds said the enlarged group will pay its final dividend for the year in shares, after which it will pay a 2009 dividend based on a payout ratio of 40%.

Lloyds TSB, smaller by assets but financially stronger, was this week cajoled by U.K. regulators and Prime Minister Gordon Brown to invite HBOS under the shelter of its Triple-A rating — a relatively steady ship in the stormy credit market waters.

Together, HBOS and Lloyds TSB will hold nearly a third of all U.K. mortgages and a quarter of all U.K. savings. In normal circumstances, such a deal wouldn't be approved by competition authorities, but U.K. regulatory bodies appear to have taken the stance that desperate times call for desperate measures.

In recent days, HBOS' shares have been so battered that at one point Wednesday morning, its market capitalization was down by two-thirds since Friday. The run on the shares came as analysts expressed concern about HBOS' funding requirements, and assurances from the bank and from the Financial Services Authority did nothing to assuage investors — in fact, the drop accelerated.

The credit crisis has left U.K. banks worse off than just with a bruised ego. Last autumn, the government made its first overtures to Lloyds TSB with the troubled Northern Rock. Lloyds rejected the deal and after months of lending billions to Northern Rock, the government finally nationalized it in February.

Since then, four of U.K.'s banks have raised capital, market caps are down by as much as 90%, Alliance & Leicester PLC has agreed to be acquired by Spain's Banco Santander S.A., and now, the government's gone full circle back to Lloyds TSB and asked it to step up.

Analysts said the government appeared to have created a sweetener for Lloyds with the move to extend the Special Liquidity Scheme, under which banks can pledge collateral to the Bank of England in return for against treasury bills. The scheme will now run until Jan. 30. The move marks a U-turn from only last week, when the BoE said the scheme would end on Oct. 21 as originally planned.

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