HBOS's private investors swallow takeover medicine

BIRMINGHAM, England (Reuters) - HBOS's army of private investors showed a weary resignation on Friday that they have little choice but to accept a takeover of Britain's biggest mortgage lender.

HBOS investors were meeting to vote on its proposed takeover by rival Lloyds TSB Group, as a profit warning released ahead of the vote showed how needed the deal is. HBOS shares were trading down 21 percent.

"I don't feel I've got any choice because I don't see us proceeding on our own," said Joy Martin, a private shareholder typical of many gathered at the meeting. "This morning's news was even worse."

HBOS has the broadest investor base of any large company in Britain with over 2 million private investors, a legacy of the demutualisation of former building society Halifax in 1997 when 7.5 million customers received shares.

Halifax merged with Bank of Scotland four years later to create HBOS and now Lloyds wants to take it over to create a dominant UK retail bank.

Most among about 300 investors attending the meeting said they were resigned to their fate. Big institutions who control the bulk of HBOS's shares will already have voted and analysts expect them to support the bid.

"I shall vote in favour because the bank has got itself into such a state it's the only way to save the company," said shareholder Gary Maddock. "I'm very disappointed at the people at the top."

REMAINING VALUE

HBOS shares have crashed 90 percent this year but Chairman Dennis Stevenson has warned shareholders they could lose any remaining value as the bank could be nationalised if the deal is not approved.

"I'm voting for because it is safeguarding the little bit of shareholding we've got left," said John Neale, a retired shareholder from Birmingham. "We don't want the government taking us over."

The new bank will be Britain's biggest provider of current or checking accounts and its top home lender.

"It's going to be massive, I feel quite confident about it," said Martin. But she regretted the decline of a lender whose origins date back to the foundation of Bank of Scotland in 1695 and the Halifax in 1853.

"My parents were real followers of the Halifax and they would be horrified."

Some investors were prepared to take a stand, however.

"I will vote against because I'm bloody minded," said Bob Moreton. "It's not really been put to people in a free and democratic way ... it's a fait accompli being imposed on shareholders by government and management."

Anne Harvey, originally from Paisley in Scotland and now working in London, said she would vote against the deal as "it will devastate the Scottish economy" and had been allowed to by-pass competition laws.

(Writing by Steve Slater; Editing by David Holmes)