PROSPECTS of a Bank of China bid for HBOS, borne like Chinese whispers through a forest of impenetrable bamboo, have retreated as mysteriously as they came.
The Bank of China was indeed the rival option being pursued for weeks by the former Intelligent Finance chief, Jim Spowart, and his London investment bank contact, Tim Goode.
Spowart and Goode had kept markets guessing for weeks on the identity of
a potential rival bidder that was poised, they said, to enter the fray. Names placed in the boiling brew of speculation included Deutsche Bank, Santander and HSBC.
It all got steamy as a Chinese laundry. But few guessed that the Bank of China, majority owned by the Chinese government and one of the ten biggest banks in the world, might be a suitor. It has no significant retail presence in Europe. And it has no track record in entering into contested takeover battles of this type and scale – particularly a contest that has become politically so fraught.
Now the "Shanghai Solution" has disappeared in a puff of smoke. But it leaves behind a miasma of mystery.
Did the BoC, as Spowart suspects, get a frosty reception from the UK Treasury? Did the Treasury leak the name to disrupt bid plans or flush out other contenders? Or might the BoC's interest have run into questions at home, as China fights to beat off recession?
I understand its interest in HBOS cooled sharply on Monday afternoon when Goode met representatives of the BoC in London. And mysteriously, barely an hour after this meeting, the BoC was named as the secret suitor by the BBC's Robert Peston in a speculative piece in his BBC blog. Spowart and Goode, infuriated by the leak, insist they did not give away the name to him or to any of the dozens of journalists ringing them. So who did?
And they still believe interest can be rekindled even at this desperately late hour. Goode is due to have further meetings with the BoC today and may fly to China next week if there is a chance of rekindling interest.
But was there really anything more than drifting smoke? Spowart insists: "This was definitely no will o' the wisp" and that this was a real expression of interest. BoC is first thought to have taken an interest when the LloydsTSB bid emerged. Goode, who had worked years ago on Royal Bank's share stake in BoC, made contacts and worked to arrange potential financial support from private equity groups.
But regulatory clearance – both here and in China – was the priority before any further steps were taken.
On the stock market yesterday, it was the roar of the bear, not the dragon, that shook the banking sector. Shares in Lloyds TSB fell 9.1 per cent to 177.4p, while HBOS slithered 7.9 per cent to 99.2p. The implied terms of the Lloyds bid price each HBOS share at 106p.
For the moment at least, counter staff at Bank of Scotland are spared the task of reassuring customers that their bank statements will not be appearing in Mandarin any time soon.
The full article contains 530 words and appears in The Scotsman newspaper.
