HBOS shares fall on Lloyds deal repricing talk

By Myles Neligan

LONDON (Reuters) - Shares of HBOS HBOS.L, the bank which has accepted a bid from rival Lloyds TSB Group (LLOY.L), fell as much as 20 percent on Tuesday amid market talk that Lloyds may reduce its offer by a quarter.

Lloyds shares closed up 4.3 percent at 226.5 pence, giving its offer a value of 188p per HBOS share. Under the recommended offer, HBOS investors get 0.83 Lloyds shares for each HBOS share they own.

By contrast, HBOS shares tumbled 13.8 percent to 122.4p, the biggest faller in the FTSE 100 share index and putting them at a 35 percent discount to Lloyds' offer price. The stock fell as low as 113 pence.

Several dealers cited talk that Lloyds may revise its offer to 0.6 of its shares per HBOS share.

Both banks declined to comment on the talk of a possible renegotiation but said they were pressing ahead with the acquisition process.

Lloyds CEO Eric Daniels said in a statement: "Market conditions are obviously difficult, but the acquisition of HBOS remains a fantastic opportunity to create the UK's leading financial services group and to create great value for both sets of shareholders."

One top ten shareholder in Lloyds said the absence of rival suitors would make it easier for Lloyds to reduce its offer.

"Within the current market, HBOS is unlikely to find another bidder, so Lloyds will have some flexibility in the terms according to what they find in their due diligence process," the shareholder said.