Co-op Bank and Coventry BS reach non-binding terms for £780m cash acquisition

The Co-operative Bank (Co-op Bank) and Coventry Building Society have reached “non-binding heads of terms” for a £780m potential cash acquisition.

In a statement, Co-op Bank and Coventry Building Society said that discussions around the potential transactions are “well-advanced”, and the society said it has “completed substantive due diligence to its satisfaction”.

The companies said that they had entered into exclusive merger talks in December last year.

The statement noted that the parties are “working together to enter into definitive agreements in due course”.

It stated: “There can be no certainty at this stage that an acquisition of the bank will occur, and the potential transaction remains subject to the agreement of terms in a manner satisfactory to the parties. The potential transaction would also be subject to regulatory approval.”

The statement noted that the merger would “deepen the enlarged group’s existing presence in mortgages and savings and extend the society’s propositions”.

‘Enlarged range of products and propositions’

The Coventry Building Society said that the merger would create a combined group with a pro forma balance sheet of £89bn and allow the mutual to leverage “financial scale” and a “diversified funding base” to offer “strong member value” and “enhance investment”.

It added that it would offer Coventry Building Society an “established position in the personal current account market, extending the society’s product proposition to meet more of members’ daily needs”, broaden its channels and distribution capabilities and introduce a business savings and current account proposition into the mutual’s offering.

The society said it would seek to integrate the bank “gradually over several years”, and customers would benefit from an “enlarged range of products and propositions on offer”.

“It is Coventry Building Society’s current intention that eligible bank customers would become society members over a period of time post-completion.”

The Coventry Building Society board said that, if a potential transaction was to proceed, then a vote is not required.

Steve Hughes, Coventry Building Society’s CEO, said: “This is an exciting moment for the society. We have a very successful history, and we believe this could be the basis of a very successful future – with membership, great value and great service at its heart.”

“The Co-operative Bank is a financially stable, profitable organisation with a shared heritage and products and services that complement our own.

“Its customers, colleagues, branches, mortgages and savings balances, and the additional products and services it provides, will make us stronger and enable us to continue offering the value and service that matters to members and customers alike. We’re confident that we have the people, capability and the financial strength to bring both organisations together successfully over a number of years.”