Coventry Building Society in £780m merger talks with Co-operative Bank

Thursday 18 April: Updated to reflect recent developments.

Non-binding terms have been agreed for a potential acquisition of the Co-operative Bank by Coventry Building Society for a total cash consideration of £780 million.

Though there is ‘no certainty at this stage’ that the deal will occur, and both parties await approval from financial services regulators, Coventry CEO Stephen Hughes told members that the society ‘believes it’s the right thing to do’.

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

“We may be three times bigger, but the bank’s customers, colleagues, branches, mortgages and savings balances, and the additional products and services it provides such as its business proposition, will make us stronger.

“We’re confident that we have the people, capability, and the financial strength to achieve this. Our next step is to agree the contractual terms and gain regulatory approval.”

The deal would create a combined group with a pro forma balance sheet of £89 billion.

Coventry says this would allow the society to leverage its financial scale and a diversified funding base to offer strong member value and enhance investment.

It would also be able to broaden its channels and distribution capabilities across a larger national branch footprint, as well as introduce a business savings and current account proposition to its offering.

Coventry is expected to face questions at its annual meeting next week – including whether members would be invited to vote on the deal.

Nationwide faced criticism recently in denying its members a vote on its own proposition to buy Virgin Money.

Read more - Nationwide strikes preliminary agreement to buy Virgin Money in £2.9bn deal

Coventry and Co-operative Bank have been in talks for more than three months. Should they strike a deal, the Co-operative Bank would be effectively remutualised, boasting close to £90 billion in assets.

It comes after the Co-op Group was bailed out for £1.5 billion by US hedge funds in 2013, followed by a further rescue in 2017 which saw Bain Capital Credit and JC Flowers take a 10 per cent stake in the company.

PJT Partners and Fenchurch Advisory Partners are advising the Co-operative Bank on the latest talks, while J.P. Morgan and KPMG are advising Coventry.