Gordon Brown personally approved the £12 billion ($19.6 billion) rescue of Britain’s HBOS by rival lender Lloyds TSB in September 2008. So determined was the British prime minister to see a merger stabilize the UK’s top mortgage lender that he suspended anticompetition laws. But deals done in haste in a crisis risk coming undone.
Only after the merger was signed did Lloyds realize the dire state of HBOS’s corporate loan book. So Lloyds CEO Eric Daniels bypassed his initial adviser on the deal, Bank of America Merrill Lynch’s Matthew Greenburgh, and called in another close confidant, senior UBS banker Alex Wilmot-Sitwell, to renegotiate the terms.
For Wilmot-Sitwell, 49, who’d joined UBS in 1995 as head of corporate finance for South Africa and three years later moved to London to take charge of U.K. investment banking, just assembling a deal team proved to be a challenge. John Cryan, the other UBS banker on the Lloyds account, had recently become CFO, and his replacement, Patrick Porritt, was tied up advising the troubled Royal Bank of Scotland. So Wilmot-Sitwell drafted Christopher Fox, a financial institutions specialist who ordinarily focused on the Middle East and Asia but had been working with the U.K. Treasury on a bank-rescue plan.
“We were brainstorming in the Treasury and discussing a guarantee scheme,” he recalls. “The enormity of what we were discussing came home when £1 trillion was discussed as a cap, and I realized that was the first time I’d used that number in a professional conversation.” Fox joined the Lloyds team right after the bank rescue plan was announced on the morning of October 8, 2008.
Speed was now of the essence. Concerns about the health of U.K. banks in general and of HBOS in particular had caused Lloyds’ share price to drop by 32 percent. With confidence cratering, the advisers scrambled to get a deal done before markets opened on Monday, October 13. Wilmot-Sitwell and Fox spent the weekend holed up at Daniels’s Chester Square townhouse. Fox remembers leaving at 4:00 a.m. on Sunday and showing up four hours later at Lloyds’ Gresham Street offices to thrash out the finer points of the deal.
When Monday dawned, Lloyds an-nounced agreement on a revised offer: It would exchange 0.605 of its shares for every HBOS share, down from 0.833 originally. And the Treasury would inject £11.5 billion in capital into HBOS and £5.5 billion into Lloyds by buying preference shares — giving it a stake of 43 percent in the group.
Fox has gone back to his emerging-markets beat. And in April, Wilmot-Sitwell was promoted to co-head of UBS’s investment banking business (see “The Power 25: Leaders in Finance”). “Our relationship with Lloyds was cemented and became much broader with the HBOS deal,” he says. UBS joined with BofA Merrill Lynch in November to underwrite a £13.5 billion rights issue for Lloyds.
| | 1 | Jack Levy | Goldman, Sachs & Co. | |
| | 2 | Alex Wilmot-Sitwell | UBS | |
| | 3 | Thierry Varène | BNP Paribas | |
| | 4 | Michael Klein | Citi | |
| | 5 | Arthur Korpach | Canadian Imperial Bank of Commerce | |
| | 6 | Todd Snyder | Rothschild |
