Coventry Building Society speeds up £780m deal with Co-operative Bank

Coventry Building Society Pursuing £780m Takeover of Co-operative Bank, Aim to Finalize Deal Within Days

The Coventry Building Society is currently in talks to acquire the Co-operative Bank for a reported £780m. This potential acquisition would position the Coventry as one of the largest high street lenders in Britain.

According to sources, the Coventry is keen to finalize the deal in the next few days in order to avoid falling under the UK Takeover Code. Both parties are motivated to avoid any additional financial and regulatory complexities that may arise if the transaction becomes subject to the code.

Negotiations between the two organizations have been ongoing for several months, with a non-binding heads of terms agreement signed in April. It is reported that the Coventry and the Co-operative Bank are currently working to resolve remaining issues, particularly in relation to balance sheet provisions.

If the deal is successfully completed, it will effectively remutualize the Co-operative Bank, more than a decade after its near-collapse and subsequent bailout by American hedge funds. The merger would result in an organization with millions of customers and assets totaling close to £90bn.

The Coventry has announced that it will not be offering its 2m members a vote on the Co-operative Bank takeover, in line with Nationwide’s decision to exclude its 17m members from voting on its proposed £3bn acquisition of Virgin Money. Interestingly, the combined Coventry and Co-operative Bank would be comparable in size to a standalone Virgin Money, serving approximately 5m customers across Britain.

This potential merger would greatly benefit the Coventry in the personal current account and business banking markets. In 2013, the Co-operative Bank’s attempt to acquire the branch network which eventually became TSB was thwarted due to the revelation of its own financial crisis. At the time, the Co-operative Bank was part of the wider Co-op Group and was ultimately rescued by American hedge funds in a £1.5bn deal. This event was further marred by the tabloid exposure of the bank’s former chairman, Paul Flowers, and his private life.

In 2017, the Co-operative Bank required a second bailout from investors, resulting in Bain Capital Credit and JC Flowers acquiring a 10% stake in the company. More recently, in the autumn of 2021, the Co-operative Bank approached Spanish-owned TSB about a potential merger, but talks did not progress.

The Co-operative Bank is being advised by PJT Partners and Fenchurch Advisory Partners in these sale talks, while JP Morgan and KPMG are advising the Coventry. Both the Coventry and the Co-operative Bank have declined to comment on the matter.

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