Threadneedle: Santander's bid for Alliance & Leicester

UK Growth & Income Fund Manager and Banking Sector Specialist, Chris White, gives his views on the Alliance & Leicester takeover: "I'm sure that Alliance & Leicester shareholders feel aggrieved at only receiving 317pence per share given the shares peaked at 1248p in 2006. This means that the bank is being valued at around 1 X tangible book, which is a very attractive price for Santander given the prospect of cost savings and funding synergies for the group.

"A counter-bid is not out of the question, but no one can realistically match the firepower of Santander given that they plan to add £1bn of capital for provisioning, restructuring and maintenance of a core equity tier 1 ratio of 6%. Lloyds seem the most likely counter-bidder as they would have the potential for similar synergies and they have shown appetite for moving into a more expansionary phase.

"However, this takeover does mean there is one less problem in the banking sector for the FSA to worry about, as Santander is a large, well capitalised bank with a management team with a strong track record."