Lloyds TSB has unveiled details of its Ј12.2bn takeover of HBOS, a deal it described as a "unique opportunity".
The deal values shares in Halifax Bank of Scotland - the UK's biggest mortgage lender - at 232p each, and could lead to cost savings of Ј1bn a year.
Lloyds confirmed the deal would trigger job losses but played down claims that up to 40,000 staff faced the axe.
Effectively the buyout is a rescue deal as HBOS shares have plummeted in recent days amid concerns for its future.
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Under the terms of the deal, which must be agreed by investors, HBOS shareholders will receive 0.83 Lloyds shares for every HBOS share.
"This will be a unique opportunity to accelerate and extend our strategy and create the UK's leading financial services group," said Lloyds chairman Sir Victor Blank.
Market leader
Lloyds added that the takeover was part of its strategy to build "the UK's leading finance company", adding that it also intends to increase the number of competitive mortgages on offer for first-time home buyers.
The enlarged group will hold a third of the UK mortgage market, but competition watchdogs will not block the deal as it was backed by the government.
Following the takeover, Lloyds chief executive Eric Daniels will take the helm of the enlarged group. The future of HBOS chief Andy Hornby is unclear.
The group also moved to allay fears that the takeover would mean a blow to Scotland where HBOS is currently based.
Lloyds said the enlarged group would continue to use The Mound - HBOS's corporate headquarters - in Scotland, continue to hold annual general meetings in Scotland and carry on printing Bank of Scotland notes.
"In addition the management's focus is to keep jobs in Scotland," it added.
Newspaper reports have claimed that as many as 40,000 jobs could be lost in the wake of the takeover.
'Powerful franchise'
"This is the right transaction for HBOS and its shareholders," said HBOS chairman Dennis Stevenson.
"Against the backdrop of the very high levels of volatility our industry is experiencing, the combined group will be one of the strongest players in the UK financial services sector.
"In addition, the combined group will have excellent brands and a very powerful franchise," he added.
BBC business editor Robert Peston - who broke the news of the deal - said the government had opted to push through the Lloyds TSB-HBOS tie-up after HBOS voiced concerns that depositors and lenders had begun to withdraw their credit from the bank.
Concerns about HBOS's security were so great that even the prime minister was involved in pushing through the deal, our business editor said.
"There were growing concerns in the HBOS boardroom that a climate of fear was being created about its future that could have led to a funding crisis, or a Northern Rock-style run - on steroids," he said.
(BBC)
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