City View: Abbey and Lloyds may be too close for comfort.
Rather than conduct a discreet auction for itself, Abbey National has challenged Lloyds TSB to come up with a hostile bid or else let it proceed with a gentlemanly merger with Bank of Scotland.
The episode, though, has pretty well eliminated the third option of staying independent.
After seeing Lloyds TSB cold-shouldered, Abbey National's shareholders would not be thrilled to see their directors slam the door on Bank of Scotland's approach that has carried their shares up from 969p to close on pounds 12 the other day. They would be outraged if the sticking point were to be the ambition of Abbey National's Mr Ian Harley to run the combined show.
Personalities aside, though, it is easy to see why the Abbey National directors see Bank of Scotland as the more attractive proposition.
It would be an alliance of complementary opposites. Abbey National has only a handful of branches in Scotland and Bank of Scotland takes great care to use only a minimum of bricks and mortar on either side of the border.
Abbey National would come with Britain's second biggest mortgage book as its dowry, Bank of Scotland with a strong portfolio of current accounts, which all the former building societies struggle to accumulate.
Abbey National has a well-established and profitable treasury operation as well as its e-bank Cahoot, now up and running, while Bank of Scotland has an enviable corner in financing buy-outs.
At this stage it is hard to see whose blood would be on the carpet. There is nothing to frighten anybody.
A takeover by Lloyds TSB would be something else. Its chairman, Sir Brian Pitman, has a reputation as a ferocious cost-cutter - though he trod very carefully with TSB's branches and left Cheltenham & Gloucester's network pretty well intact.
Be that as it may, some analysts went out with a tape measure a while back and found 656 Lloyds TSB and Abbey National branches within 50 metres of each other. They converted that into potential cost savings of pounds 700 million a year.
Sir Brian might reckon that a prize worth a fight. On the other hand, he might not.
Even if the prospect of mass branch closures is not supposed to warrant a reference to the Competition Commission under the new, non-political rules, the prospect of the enlarged Lloyds TSB providing 30 per cent of all Britain's current accounts almost certainly would.
On top of that, the combination of Cheltenham & Gloucester and Abbey National's mortgage operations would also represent a 23 per cent market share. There would be an eye-catching accumulation of Scottish life assurance, too. Lloyds TSB already has Scottish Widows. Victory over Abbey National would bring it Scottish Mutual and Scottish Provident.
Sir Brian has spoken often about the number of takeovers that end badly. Despite the prospect of that pounds 700 million a year, he could be wary of this one - unless Bank of Scotland is provocatively stingy.