Abbey National CEO Luqman Arnold is selling the UK mortgage bank for only a small premium to its share price. Yet he has said that the decline in Abbey's performance will end this year. So why choose now to recommend a deal with Spain's Santander Central Hispano?
The fact is that Arnold has been cornered.
He cannot easily demonstrate that Abbey is worth more today than the 560p a share that Santander is offering. And given Abbey's history of rejecting bids, or letting them slip through its fingers, he daren't turn Santander away in the hope of selling for more later.
Abbey's only defence against a bid was its inflated share price. This has turned out to be a phantom deterrent. The Spanish have found enough synergies to justify offering a modest premium. And because Arnold has no other defences, they do not need to offer much more than this.
Consider an organic defence. Arnold would have to show that Abbey was capable of a dramatic turnround. Even if the rot stopped in the second half, it would be hard to argue that Abbey deserved a premium valuation.