Massive bonuses for top four after A&L takeover

Aug 20 2008 by Iain Laing, The Journal

ALLIANCE & Leicester’s top directors will gain huge windfalls for simply staying in their jobs following the lender’s £1.3bn takeover by Spanish bank Santander.

Santander is offering retention bonuses of up to 125% of salary for its top four bosses if they remain in post until December next year.

Chief executive David Bennett, who has been in the top job little more than a year, could land a potential £750,000. He also owns nearly 61,000 A&L shares valued at more than £190,000 by Santander’s offer, which was unveiled in July.

Details of the bonuses emerged in information sent to A&L’s investors, who must approve the takeover deal at a meeting in Birmingham on September 16.

The retention payouts come despite investors seeing the value of their shares fall to just a quarter of their worth in May last year as the lender is buffeted by the credit crunch.

The former building society demutualised in 1997 and currently has around 214,000 private investors, representing some 38% of shares. They will receive one Santander share for every three of A&L, valuing A&L’s stock at 317p each as of August 8.

Santander plans to merge the former building society with Abbey – which it bought in 2004 – creating a business with 959 UK branches and a share of more than 8% of the savings and personal loans market.

The A&L board has agreed to the deal to provide certainty in troubled financial markets.

The lender can trace its origins back to 1852 and the formation of the Leicester Permanent Benefit Society. A&L was created in 1985 in what was then the biggest-ever merger between building societies.

Santander – the world’s sixth biggest bank by market capitalisation and the biggest in Europe – expects to make annual savings of more than £180m by the end of 2011 through the combination of back-office functions.

Job cuts are likely among A&L’s staff of more than 7,000 following the merger, although Santander has said it will look to reduce staff through natural attrition and avoid redundancies where possible.