24th May 2024 08:52
(Alliance News) - Coventry Building Society on Friday said it has agreed to buy Co-operative Bank Holdings PLC for GBP780 million in cash, in the latest shift in the UK's banking landscape.
The deal, which is expected to complete in the first quarter of 2025, will create a combined group with assets of around GBP89 billion. Coventry said owners of 88% of Co-operative Bank A shares have agreed to the takeover, whilst owners of 100% of B shares have agreed.
Back in late December, the two banks had said they were in "exclusive discussions" to "evaluate the merits of a combination" of the firms.
Co-op Bank is no longer part of the wider Co-operative Group after parting ways in 2017 when it fell into deep financial difficulty. It is now owned by a group of private equity investors, including US-based JC Flowers and Bain Capital Credit, who bought a stake in 2021.
Coventry Chair David Thorburn called it a "transformational moment" for the two mortgage lenders.
"We're building on our shared heritage and creating a stronger mutual business that will deliver in the best interests of our current and future members," he added.
Co-operative Bank Chair Bob Dench said: "I am sure the Coventry Building Society will prove to be a very good home for us."
Of the cash consideration, up to GBP125 million will be deferred for a period of 3 years from completion subject to the future performance of the Co-Op.
The deal will be funded from Coventry's existing cash resources at completion.
Coventry will integrate the Co-Op Bank over several years, and during this period, both will continue to operate under their current names and branding.
The combined group will be led by David Thorburn as chair and Steve Hughes as chief executive officer.
Both currently hold those positions at Coventry Building Society.
The acquisition is subject to regulatory approval from both the Prudential Regulation Authority and the Financial Conduct Authority.
The deal is the latest shake-up in the UK's banking industry after Nationwide Building Society agreed to buy rival lender Virgin Money UK PLC in March, a deal worth about GBP2.9 billion.
On Thursday, Nationwide said that the acquisition is expected to complete in the fourth quarter of this year. Virgin Money shareholders voted in favour of the deal at a general meeting on Wednesday.
In February, Barclays PLC agreed buy the retail banking business of Tesco Bank from Tesco PLC.
Barclays will pay about GBP600 million for the business, which has been in operation for more than 25 years.
By Jeremy Cutler, Alliance News reporter
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