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Alliance & Leicester shareholders have approved the bank's takeover by Spanish giant Banco Santander with a majority of 84 per cent.

The European Commission has also given its approval of the deal, which will see Alliance & Leicester become part of the same group that also owns Abbey.

The scheme is now expected to become effective on Friday October 10th, when Alliance & Leicester (A&L) shares will be converted to Banco Santander shares.

Roy Brown, acting chairman of A&L, said: "We welcome our shareholders’ approval of the offer from Santander, which was unanimously recommended by the board of A&L.

"The economic outlook and continuing uncertainty in financial markets have reinforced the board's view that this transaction is in the best interests of shareholders, customers and other stakeholders.
"Should all approvals go through on time, A&L will become a wholly owned subsidiary of Banco Santander from October 10th 2008."

A&L has long been seen as a takeover target and has been linked with Santander for years before the group finally made its move in July.

The share price had lost 80 per cent of its value over the year before Santander's offer, as A&L was particularly hard hit by the credit crunch.

In August Alliance & Leicester reported a 99 per cent fall in profits from £290 million in the first half of 2007 to £2 million in the first half of 2008.

Alliance & Leicester shareholders are now faced with a tax problem as Banco Santander is listed in Spain and the deal sees them taking shares in the firm.

If shareholders choose not to sell their shares before an October 10th deadline, the taxation arrangements include an 18 per cent charge on Santander dividends, which can only count towards UK tax bills if a special Spanish tax form is submitted and a full tax return is made to the HMRC.

Also the obligatory submission of the special Spanish tax form within a month of selling Santander shares, failing which you could be fined €100 or more.