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While most investors were pre-occupied with the fate of another UK bank last week, shareholders in mortgage bank Alliance & Leicester quietly assented to a takeover by Spain's Banco Santander. The EU has also waved the deal through, saying the combined entity won't control enough of the UK market for it to be anti-competitive.
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This leaves private shareholders in a tricky position. Bank shares across the world have taken a real beating - and Santander is paying for Alliance & Leicester shares by issuing more of its own. Do you really want to own 'foreign' bank shares at a time of such uncertainty for bank shares generally?
The first point here is that our advice in the past about Alliance & Leicester has been pretty good. We first suggested selling the shares back in March, when they were 522p each. And at the time the deal was announced, we said sell Alliance & Leicester shares in the market rather than accept the takeover. Spot on again - news of the takeover sent the shares up to 335p, and in the following days they went as high as 352p because of speculation about a rival bid. Now, Alliance & Leicester shares are worth 276p each, some 18 per cent less.
The second point is that Santander's shares have only fallen about 6 per cent over the same time frame, so in theory, accepting Santander shares is a more attractive option now than it was two months ago. But how easy is it to own shares in a Spanish bank?
Santander has made it easier by listing on the London stock exchange and paying dividends to UK investors in sterling. You can buy and sell the shares through a nominee service run by the company's registrars, or via Abbey Sharedealing (Abbey is owned by Santander).
However, there are two big drawbacks. One is that there is barely any trade in Santander's sterling shares. The other is taxation. You'll be required to fill in a form for the Spanish tax authorities when you sell the shares, and there's also paperwork relating to the dual taxation of dividends, which Santander declares quarterly. Both forms require a certificate of tax residence from HM Revenue & Customs, and you'll also need the services of a Spanish Gestoria .
Santander's impressive UK shareholder website contains all the information you need about buying, selling and the tax position. But for small amounts of shares, we still think it's more hassle than it's worth. The price differential between the Santander bid and Alliance & Leicester's current price is pennies - so sell your A&L shares in the market. You'll need to do this by Friday 10 October.
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-IC-1.9.0c-prod - 15/05/2009 11:00:33 - stuart.turner
