Santander bids for UK mortgage lender

Banco Santander, which also owns Britain's Abbey National Bank, said that under the terms of the proposed takeover, Alliance & Leicester shareholders would receive one share in Santander for every three shares they hold in the British lender.

Roy Brown, acting chairman of A&L, said the "proposal from Santander represents value for shareholders and the combination of A&L with Santander's UK operations is an excellent fit."

Alliance & Leicester It is one of several British banks which have been badly bruised by tightening credit market following the collapse of the U.S. subprime mortgage market. Banks' unwillingness to part with loans as house prices fall have cut into revenue and depressed share prices.

Shares of Alliance & Leicester fell steeply in February after it cut its forecast for full-year 2008 earnings.

Santander said the deal values Alliance & Leicester shares at 299 pence ($5.95). It said this represents a 36.4 percent premium based on Friday's closing price.

Alliance & Leicester shares surged almost 53 percent to close at 335 pence ($6.66) per share. Other banking stocks also rose.

Santander--the largest bank in the euro zone by market capitalization--is racking up revenue thanks in part to booming business in Latin America.

The Spanish bank is also hunting for acquisitions abroad. Earlier this year it purchased 20 percent of Philadelphia-based Sovereign Bancorp Inc. It made its 8 billion pound deal for Abbey National in 2004.

Santander chairman Emilio Botin said Monday the acquisition of Alliance & Leicester "will be a significant step in the development of Santander's UK business. The transaction meets Santander's return on investment target as well as being accretive for Santander Shareholders. We are very pleased to be working with the management and employees of A&L as we seek to build with Abbey one of the leading franchises in the UK banking sector."