THE Halifax, Britain's third largest bank, has entered the UK contract hire industry by taking a 50% stake in Lex Vehicle Leasing. Halifax's decision to enter the burgeoning leasing sector by paying £162.5 million for a share in the UK's largest contract hire company with a fleet of 98,000 cars and vans ends long-time speculation that the bank could buy up-for-sale Arriva Automotive Solutions.

Halifax has also agreed to pay Lex up to £15 million in the first quarter of 2002 dependent on cumulative vehicle disposal performance over the next three years. The supplementary payment reflects the present turmoil in the UK used car market following a near year-long slump in residual values. The new partnership follows Lombard North Central's decision to sell its controlling interest in Lex Vehicle Leasing to Lex Service to allow the finance house subsidiary of National Westminster Bank to concentrate on expanding the fleet of wholly-owned British Car Contracts.

Lex Service, which already had a 50% stake in Lex Vehicle Leasing, increased its stake to 80% in a £83.5 million deal, with an option to acquire the remaining 20% at a cost now calculated at £45 million. Simultaneously Lex Vehicle Leasing announced it would be looking for a new funding partner. That search ended following around seven months of discussions, with the announcement that the Halifax would be Lex Service's new 50/50 joint venture partner in Lex Vehicle Leasing. The deal saw the Halifax pay Lex £117.5 million for its 30% stake in Lex Vehicle Leasing and pay Lombard £45 million for the remaining 20%.

The Halifax has yet to announce who will take up positions on the new board. The deal is subject to shareholder approval and is planned to be completed by December 31.