Lloyds investors 'mugged' by deal

Helen Davies, QC for Lloyds, opened the bank's defence on Thursday by telling the court that a £600m claim for compensation by disgruntled investors was based on "myths and misconceptions" and that the deal was undertaken after advice from a list of advisers which ran to 50 pages.

"The claimants' case is fundamentally flawed at every level".

In a written filing submitted to the court, Wolfgang Berndt, the former head of Lloyds' remuneration committee who retired in 2010, was quoted as saying at the time that "the proposed acquisition was a once-in-a-lifetime opportunity for Lloyds".

A series of claims brought by Royal Bank of Scotland shareholders - which would have seen Fred Goodwin, the bank's former boss, take the stand - were settled before the case came to trial earlier this year.

Lloyds shareholders allege the subsequent government-brokered takeover of HBOS, that valued the struggling bank at around 5.9 billion pounds, wiped billions off the bank's market value.

The group, which includes roughly 300 institutional investors such as pension funds, is suing Lloyds Banking Group, former chairman Sir Victor Blank, ex-chief executive Eric Daniels, former chief financial officer Tim Tookey and two other former directors. Lloyds itself then had to be rescued with a 20.5 billion- pound government bailout in 2009.

At a London event hosted by Citigroup on September 15, 2008, Blank had received what he interpreted as assurances from former Prime Minister Gordon Brown that competition concerns would be swept aside if the deal could be completed quickly.

Lloyds also argues the shareholders can not prove they are any worse off, with expert testimony commissioned by them suggesting "contagion" after a likely HBOS collapse would have dragged down bank shares further, including Lloyds.

Yesterday Richard Hill QC, representing the shareholders, argued the bank should have disclosed HBOS was on "secret life support" from both the United States and UK governments and Lloyds itself.

The High Court has heard shareholders in Lloyds were "mugged" when the bank recommended buying Halifax Bank of Scotland (HBOS) at the height of the financial crisis.

"The information that would have disclosed it was a bust failed bank was omitted deliberately".

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