On September 16 the HBOS share price fell to 88p. The following day, it emerged that Lloyds TSB was in advanced talks to acquire HBOS.  The recommended terms were that HBOS shareholders would be offered 0.83 Lloyds shares for every HBOS share.
 
The Prime Minister Gordon Brown revealed that he had personally intervened to broker the deal and made clear the Government was prepared to ‘rip up Britain’s competition laws’ to allow the merger to go ahead. The Chancellor, Alistair Darling, added: ‘We have made a decision that we will waive the competition requirements in relation to these two banks – that’s not going to be revisited.’
 
On September 18, the then BERR Secretary John Hutton, announced the Government would introduce an intervention order to overrule any decision by the Office of Fair Trading [OFT] to refer the proposed merger to the Competition Commission.
 
By the beginning of October, it was recognized by both the UK and US governments that a rescue package was required to support the stability of the financial systems. The UK Government announced a package of £400 billion and on October 13 it stated a total of £37 billion was to be invested in three banks, RBS, Lloyds and HBOS. £5.5billion was to be invested in Lloyds at a price of 173p and £11.5billion invested in HBOS at 113p.

On the same day Lloyds revisited the terms of the merger reducing the offer to 0.63 Lloyds shares for every HBOS share.  The deal was again recommended by the board of HBOS.
 
On October 31, Lord Mandelson – who had succeeded Mr Hutton – confirmed that he was overruling the OFT, claiming competition issues were outweighed by the public interest benefits of creating financial stability.

On November 3 the shareholders of Lloyds voted to approve the transaction.  The document sent to shareholders stated that if the deal did not progress Lloyds would require an extra £1.5billion of capital.

On 18th November an acquisition document was sent to HBOS shareholders setting out the terms of the deal in advance of the vote on 12th December.  The document stated that if the deal did not progress HBOS would require an extra £0.5billion of capital.

 KEY QUOTES

The Government's commitment to facilitating the accomplishment of the Merger is illustrated by the Prime Minister's Spokesman who stated on the 30 September, when asked about the Llyods takeover of HBOS:

"Our role in this was to make a commitment to introduce legislation in order to facilitate the takeover and we stood by that commitment"   Morning press briefing from 30 September 2008.

On 18 September the Chancellor of the Exchequer, Rt. Hon. Alistair Darling, stated in an interview with BBC radio 4 that:  

"We have made a decision that we will waive the competition requirements in relation to these two banks, that's not going to get revisited"  Today, BBC Radio 4, 18/09/08.