Lloyds TSB Group PLC's (LYG) acquisition of troubled mortgage lender HBOS PLC (HBOS.LN) Monday got the go-ahead as a court in Edinburgh sanctioned the scheme-of-arrangement deal.

Lloyds is buying HBOS in an all-share deal, offering 0.605 Lloyds TSB shares per HBOS share, valuing HBOS at 55.4 pence a share or a total GBP3 billion.

The merger had faced a last-minute challenge from the trustees of HBOS' pension scheme, which argued that Lloyds TSB hadn't provided adequate protection for the scheme.

However, Friday the trustees said they had agreed to drop the challenge following a request from Lloyds TSB that they reconsider because of the potential damage to planned capital raisings.

In view of this and of "helpful statements" made by Lloyds TSB to the trustees in the course of discussions, "the trustees have decided that it would be in the best interests of all concerned not to proceed with legal action," the trustees said.

The only matter outstanding for the deal to go through is the court's confirmation of the associated preference share reduction, which it will rule on at a hearing Jan. 16.

The last day of dealings in HBOS Preference Shares and linked ADRs is expected to be Jan. 14 with subsequent cancelation Jan. 19.

The two banks, which will be united under the name of Lloyds Banking Group, are also involved in raising new capital to strengthen balance sheets and in particular the all-important Tier 1 ratio.

As part of this, the U.K. government will become a 40% shareholder in the combined company receiving preference shares in return for on injection of GBP3 billion.

 
   Company Web site: www.lloydstsb.com 
                     www.hbosplc.com 
 
   -By Marietta Cauchi,  Dow Jones Newswires;  +44 207 842 9241; marietta.cauchi@dowjones.com

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