A few angry borrowers may scotch merger

AS FEW as 50,000 truculent borrowers could still defeat the proposed merger of the Cheltenham & Gloucester Building Society with Lloyds Bank next month.

The 1.2 million members should by now have received their voting forms for next month's postal ballot to decide whether to let their society sell out to Lloyds Bank.

The 806,000 customers with deposit accounts with the society will be offered a cash sweetener of 13 per cent of their balance plus £500, which works out at £513 on a minimum qualifying balance of £100 and £13,500 on a maximum stake of £100,000, to help them decide.

But the 384,000 customers who have borrowed from the society are not being offered anything, on the grounds that it would be illegal to offer them money.

To succeed in getting the merger approved, the C&G management, which favours the link with Lloyds, needs to obtain the approval of 50 per cent of the borrowers who vote, and 75 per cent of the investing members who vote. In the latter case, at least 50 per cent of those eligible must vote.

To be eligible, an investor must be the sole or first-named holder of a share account and have held an account continuously from 1 January 1993 until voting day. Perhaps 700,000 investors will meet these qualifications. In other words, the management needs to win the votes of around 350,000 investing members regardless. If there is significant opposition, it could need more than 350,000 to secure the 75 per cent majority.

However, a simple majority of borrowers with existing mortgages on the day of the vote must also vote in favour. As things stand, many borrowers may decide to vote no in the hope that rulings may change and a future merger plan could reward them. In theory, a tiny number of disgruntled borrowers could defeat the whole motion by voting against the merger in a low poll.

But the management's trump card is the 10 per cent of borrowers who are also investors. They have two votes, and many may decide to approve as borrowers to ensure that they at least get the cash as investors.

Investors have been sent a blue voting form, borrowers a green form. To cast a valid vote, borrowers must use black ink to sign their ballot form and indicate with a cross which way they want to vote. Signed forms without a cross will be taken as proxy votes for the chairman to vote as he thinks fit, and he will use your vote in favour of the merger.

Votes must be posted back to arrive before midnight on 26 March, in good time for the public meeting on 31 March at the London Arena, where members can vote in person if they prefer.