A&L Taken Over By Santander

Spanish bank Santander has taken over Alliance & Leicester (A&L), it has been revealed.

The UK mortgage lender confirmed that a 299p per share deal, plus dividend, has been agreed. News of the takeover follows weeks of speculation that A&L, one of the financial firms worst hit by the ongoing credit crunch, was facing severe balance sheet concerns and might be forced to raise capital through a sale of new shares.

However, with news of the potential Santander deal, it now appears that A&L would prefer to be bought out by another firm. The takeover could have a big impact on high street mortgage lending in Britain, as Santander already owns one of A&L's major rivals, Abbey.

A&L acting Chairman Roy Brown said: "The board is acutely aware of the significant external risks presented by the deterioration in economic conditions and the continuing turbulence in the financial markets…The proposal from Santander represents value for shareholders, and the combination of Alliance & Leicester with Santander's UK operations is an excellent fit."

The City welcomed news of the deal, with share prices in A&L rising sharply on the London exchange today. The stock was up 40 percent on early morning trading. It is thought that Santander's move represents confidence that the firm believes profits can be made from UK mortgage lenders - and therefore represents rare positive news for the prospects of the housing market as a whole.

According to recent surveys from lenders, house prices have declined by over six per cent, year on year.