Investors were ‘mugged’ over HBOS merger

FAMIlIeS were ‘ mugged’ by lloyds directors in a disastrous takeover of hBOS which cost them their life savings, the high court was told.

Almost 6,000 shareholders – including many families and pensioners – are suing the lender for up to £700m over the disastrous deal at the height of the financial crisis.

They claim bosses failed to consider the dangers of the takeover, then misled investors by falsely telling them it would be good for the bank. Soon after the deal, lloyds had to beg taxpayers for a £20.5bn bailout.

As a 14-week civil lawsuit began yesterday, lawyers for the shareholders accused lloyds and five former directors of paying way over the odds to buy hBOS for £12bn when it was on the brink of collapse.

They said that the group, including former chief executive eric daniels and ex-chairman Sir Victor Blank, ‘ massaged away’ problems in meetings with non-executive directors who raised concerns.

At the court in london, barrister richard hill QC accused daniels of carrying out a ‘sales job’ on his own board to persuade them the takeover was a good idea. In reality, he said, hBOS was toxic enough to bring both banks down.

he added that lloyds’ own reviews had revealed huge problems with hBOS’s loan book but the bosses were so eager to make their names with a big deal that concerns were ignored. hill said: ‘We are saying shareholders were mugged in this acquisition and should never have been kept in the dark.’

hBOS was facing a funding crisis which the lloyds directors were aware of but which had been kept from the public, hill told the court. he added: ‘hBOS was bust and would have had to close its doors unless it could access an emergency bailout.’

lloyds will defend the claims as the case continues.