HBOS keeps turning to Morgan Stanley, Dresdner

Who has the luxury to worry about monopolies when banks are failing? Apparently not the British.

The British government hastily brokered a deal, announced Sept. 18, that will leave the U.K.'s largest mortgage lender HBOS plc in the hands of its much smaller peer Lloyds TSB Group plc for a fire-sale price of £12.2 billion ($21.8 billion).

To forestall another bailout à la Northern Rock plc, the government intends to change its competition laws to permit a merger that will result in one firm owning more than 28% of the U.K. mortgage market.

Edinburgh, Scotland-based HBOS was advised by firms that had also lent a hand in the company's unpopular attempt to raise additional capital earlier this year: Morgan Stanley, with Simon Robey and William Chalmers in charge, along with Dresdner Kleinwort Ltd.'s David Hutchinson and Stewart Bennett. Morgan and Dresdner were the lead underwriters for the U.K. bank's £4 billion rights issue.

When most shareholders passed, taking only about 8% of the offering, HBOS sold an additional 30% in a rump offering, leaving Morgan and Dresdner with the remaining 62% of the shares.

For legal advice, HBOS once again turned to Allen & Overy LLP, as it did in the rights offering. In the Lloyds transaction Alistair Asher, who leads A&O's financial institutions group and handles its relationship with HBOS, and David Broadley led the charge, with antitrust partner Mark Friend working on regulatory issues. Asher and Broadley served as counsel in the rights offering.

Lloyds took financial advice from Merrill Lynch & Co.'s Matthew Greenburgh and Henrietta Baldock, along with Lazard's Jon Hack, Ken Costa and Will Samuel. For legal counsel, Lloyds opted for Linklaters LLP, where partners Jeremy Parr, Duncan Barber, Michael Cutting and Bill Allan led the charge.

Barber, who is co-head of Linklaters' global insurance sector team, advised Lloyds when it sold its Abbey Life Assurance Co. Ltd. to Deutsche Bank AG for almost £1 billion in 2007.