Coventry Building Society finalises £780m deal for Co-operative Bank
The Co-operative Bank is to return to its mutual roots after Coventry Building Society confirmed that it will acquire the bank from its hedge fund owners for £780m.
The deal has now been finalised after Coventry said it had made a non-binding cash offer for the bank last month that will create a lender with almost 5 million customers and an £89bn balance sheet.
Coventry, which is the UK’s second largest building society by group assets, said it remained committed to mutuality and the deal would allow the newly combined lender to increase its share of the mortgage market as well as give it a position in the current account and business banking markets.
The Co-operative Bank, which has 2.5 million retail customers and 94,000 small business customers, will become a subsidiary of Coventry Building Society, marking a return to its mutual roots.
The ethical lender, which was founded in 1872, traces its origins back to the Co-operative Wholesale Society, the body that would become the Co-operative Group, which provided financial services to the wider co-operative member-owned movement in Britain.
Coventry said it does not need to seek a member vote for the deal under the Building Societies Act 1986. The structure of the Co-operative deal means that up to £125m will be deferred for a period of three years from completion, subject to future performance, and the transaction is expected to be completed in the first quarter of 2025, with integration taking place over several years.
The deal is part of a wave of consolidation among the banking sector this year, including Nationwide, the largest building society, which has agreed a £2.9bn takeover of Virgin Money. Nationwide also decided not to give its members a vote on the Virgin Money takeover.
During the integration period, Coventry and Co-operative will operate under their current names and branding and retain their banking licences and will be headed by David Thorburn as chair and Steve Hughes as chief executive.
Thorburn, the chair of Coventry Building Society, called the deal a “transformational moment” for both organisations that would create a “stronger mutual business”.
Nick Slape, the chief executive of Co-operative Bank Holdings, said it was a “natural next step”.
after newsletter promotion
The Co-operative Bank has been seen as a potential takeover target since at least 2020, when it was approached by the New York-based private equity firm Cerberus Capital Management, which offered £270m.
The bank returned to profit in 2022 following a troubled decade after the 2008 financial crisis, in which it made a disastrous acquisition of Britannia Building Society in 2009, which then led to a £1.5bn hole being discovered in its accounts.
The problem resulted in the bank separating from the Co-operative Group and being rescued by a consortium of hedge funds and investors. Silver Point Capital, GoldenTree, Anchorage Capital, JC Flowers and Bain Capital Credit, Cyrus Capital and the fund manager Invesco took control in 2017.