The proposal from Banco de Sabadell comes less than 12 months after TSB rejoined the London stock market in a split from the Lloyds Banking Group. The deal's success will rely on the response of Lloyds, which still owns 50% of TSB and has to dispose of the remaining stake by the end of this year.
TSB said its board was minded to back Sabadell's 340p-a-share offer. Sabadell is required to announce its intention to make an offer by the 9th of April.
TSB is expected to keep its name and branding, and said that ownership would help accelerate TSB's growth strategy.
In January, TSB opened up its intermediary channel, which it announced as "the next step in the bank's growth strategy which aims to ‘shake up’ the broker market".
TSB has recruited more than 200 people in the past six months and invested in 24 local relationship managers to provide support to brokers.
In a group statement from both banks, it was said that:
"Based on preliminary discussions, the Board of TSB believes that Sabadell could support and accelerate TSB's retail growth strategy and accelerate the expansion of TSB's presence in the SME sector. Sabadell recognises the achievement of TSB's management and employees and would continue to operate TSB as a robust competitor in the UK banking market, building on the TSB brand name."
Kevin Mountford, head of banking at MoneySuperMarket, said:
“Banco Sabadell’s takeover bid is recognition of the rapid growth success of TSB since the brand was re-launched in the UK. It is also a sign that the UK banking market is proving an attractive proposition for investors, especially in comparison to the rest of Europe. While the Spanish banking market remains turbulent, the UK market has seen strong growth in some areas, with TSB being one of the most successful banking brands to launch in recent times. It is therefore no surprise that it has become a takeover target.
“While it is early days, any takeover is unlikely to impact customers - at least in the short-term. It is likely TSB will remain a UK based entity and continue to be covered by the Financial Services Compensation Scheme. However, with Banco Sabadell’s investment, TSB can grow further and generate much needed competition, particularly in the retail and SME space.”
Kebin Ma, of Warwick Business School, said:
"This is an interesting deal and looks good for both parties. Banco Sabadell clearly faces the risk that the Spanish economy will remain sluggish for a prolonged period. The bank is not as diversified as Spanish rival Santander, and the acquisition of TSB should certainly help it achieve better diversification.
"Also TSB's business is mainly retail-based, which is robust and does not come with too many complications. From TSB’s point of view, the deal is probably more about pure ownership, rather than any change in business model or risk. The offer is very good and the stock market response suggests the deal would create value for shareholders."
