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The U.K.’s latest bank merger battle took a new twist Friday when British mortgage lender Abbey National PLC and Bank of Scotland said they would begin the regulatory-approval process for their proposed merger — stepping up the pressure on Lloyds TSB Group PLC to make a hostile bid for Abbey. Abbey, which is in discussions with Bank of Scotland on a friendly merger, early last week rejected another “friendly” $27 billion merger proposal from Lloyds. Lloyds criticized the rejection, leading analysts to expect it to launch a hostile bid for Abbey sometime this week. Abbey said Friday it had submitted a draft merger notice to Britain’s Office of Fair Trading, adding that it would file a formal merger notice at the beginning of this week. That means both companies can begin talks with regulators, who will decide whether their proposal infringes on any U.K. competition rules. The Office of Fair Trading can take as long as 35 working days to decide whether to refer the proposed merger to Britain’s Competition Commission, which in turn could take up to four months to review it. Analysts doubt there would be any regulatory concerns about an Abbey-Bank of Scotland union, as there is little overlap in the two businesses. A merger between Lloyds and Abbey, however, could draw extensive regulatory review. Morgan Stanley Dean Witter & Co., UBS Warburg and Lehman Brothers Inc. are advising Abbey. Credit Suisse First Boston and Cazenove & Co. are advising Bank of Scotland. Lloyds TSB is being advised by J.P. Morgan & Co. and Merrill Lynch & Co. None of the banks would comment on the situation on Sunday. Copyright (c)2000 TDD, LLC. All rights reserved.

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