Co-operative Bank and Coventry near agreement on landmark £780m deal

17 April 2024, 18:25 | Updated: 17 April 2024, 20:28

The Co-operative Bank will this week move a step closer to regaining its mutual status when it announces that it has struck a £780m deal to be bought by the Coventry Building Society.

Sky News has learnt that the two organisations are expected to announce as early as Thursday morning that they have reached agreement on the terms of a transaction.

Insiders said the cash price to be paid by the Coventry would be close to £800m.

Their statement will mean that a combination of the two financial services businesses is increasingly probable, more than a decade after the Co-operative Bank first came close to collapse.

The Coventry is preparing to hold its annual meeting next week, when it could face questions about whether it will allow its roughly two million members to vote on the deal.

City sources said the building society - Britain's third-largest - was not keen to offer its members a vote because of the impact it would have on the takeover's timetable and the potential uncertainty it would create.

The issue has been highlighted by Nationwide's decision to refuse its 17 million members a say on its proposed £3bn acquisition of Virgin Money.

The Co-operative Bank and Coventry have been in exclusive talks for more than three months, with a range of issues still to be ironed out.

If completed, the deal will effectively remutualise the Co-operative Bank and create a financial services powerhouse with close to £90bn in assets.

By coincidence, the combined Coventry and Co-operative Bank would be comparable in size to a standalone Virgin Money, with about five million customers across Britain.

Combining the organisations would give the Coventry a major boost in the personal current account and business banking markets.

In 2013, the Co-operative Bank's bid to acquire the branch network which became TSB was left in ruins when the scale of its own crisis emerged.

At the time, it was part of the wider Co-op Group, but was forced to turn to American hedge funds to secure a £1.5bn rescue, even as its former chairman, Paul Flowers, was left humiliated by tabloid revelations about his private life.

The lender then needed a further bailout by investors in 2017, with two major investors - Bain Capital Credit and JC Flowers - subsequently taking a 10% stake in the company.

The remainder of its equity is owned by a syndicate of hedge funds.

Earlier talks about a sale of the Co-operative Bank to Cerberus Capital Management, an often-controversial investor, broke down in December 2020.

In the autumn of 2021, the Co-operative Bank approached Spanish-owned TSB about a merger, but talks failed to progress.

PJT Partners and Fenchurch Advisory Partners are advising the Co-operative Bank on its sale talks.

JP Morgan and KPMG are advising the Coventry.

The Coventry and Co-operative Bank both declined to comment on Wednesday evening.

(c) Sky News 2024: Co-operative Bank and Coventry near agreement on landmark £780m deal