Coventry Building Society (CBS) has reached an agreement with major owners of Co-operative Bank to acquire the British banking company for £780m in an all-cash deal.
The major owners collectively hold nearly 88% of the A shares and 100% of the B shares of the London Stock Exchange (LSE) listed Co-operative Bank.
Up to £125m of the total cash consideration will be deferred for a period of three years from completion, contingent upon the future performance of the bank and the terms outlined in the share purchase agreement (SPA).
Coventry Building Society is a financial institution based in England. The savings and mortgage provider had mortgage balances of £50.3bn at the end of last year.
The society has nearly two million members across the UK, who are served by a workforce of more than 3,000 employees.
On the other hand, Co-operative Bank was established in 1872. For the 12 months ended 31 December 2023, the banking company registered underlying profit of £120.9m and total income of £515.2m.
It provides various banking products and services to nearly 2.5 million retail customers and around 94,000 small and medium sized enterprises.
Co-operative Bank CEO Nick Slape said: “I am proud of what has been achieved in recent years. We have successfully transformed and simplified the Bank into one that is now sustainably profitable with a strong capital and liquidity position.
“This transaction is a natural next step and presents an exciting opportunity.”
The combination of Coventry Building Society and the bank is expected to strengthen the enlarged group’s existing footprint in mortgages and savings while expanding the former’s range of offerings.
Coventry Building Society announced that the acquisition will form a combined group with a pro forma balance sheet of £89bn as of 31 December 2023. This move enables the society to leverage its financial scale and diversified funding base, ensuring continued provision of strong member value and enhanced investment.
Additionally, the acquisition of Co-operative Bank is anticipated to expand Coventry Building Society’s channels and distribution capabilities, including a larger national branch footprint, and introduce a business banking proposition to the latter.
Coventry Building Society CEO Steve Hughes said: “By bringing together Coventry Building Society and The Co-operative Bank we will be able to deliver more value to more people in the coming years.
“I am excited about the opportunities that lie ahead, most importantly, our ability to sustain the great value and outstanding service that matters most to our members.”
Addleshaw Goddard is serving as legal adviser to the society for the acquisition.
For the bank, Freshfields Bruckhaus Deringer is the legal adviser, while Paul Hastings (Europe) is advising the sellers for the same.
Subject to regulatory approvals from both the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA), the acquisition is anticipated to be wrapped up in Q1 2025.
