Coventry Building Society proposes £780m acquisition of Co-operative Bank

Coventry Building Society, a prominent financial institution based in England, has announced its intention to acquire British banking company Co-operative Bank in an all-cash transaction valued at £780 million. This significant financial move is underpinned by an agreement on non-binding heads of terms between the two entities.

Financial Structure of the Deal

The deal’s structure includes a cash consideration, excluding capital that exceeds specific thresholds at the completion of the transaction. Additionally, a significant portion, up to £125 million, of the total cash consideration will be deferred for three years, depending on the future performance of Co-operative Bank.

Advancements in Negotiations:

Negotiations regarding this acquisition are reported to be in advanced stages, with Coventry Building Society having completed its due diligence to its satisfaction. Both parties are actively working towards finalizing definitive agreements soon, although Coventry Building Society cautions that there is no certainty yet regarding the completion of the acquisition.

Regulatory and Agreement Contingencies:

The completion of this potential transaction is contingent upon the finalization of terms satisfactory to both parties and the necessary regulatory approvals. Initial discussions about the deal were publicized by Co-operative Bank in December 2023.

Financial and Operational Impact:

For the fiscal year ending December 31, 2023, Co-operative Bank reported an underlying profit of £120.9 million and total income of £515.2 million. The merger aims to enhance the combined entity’s market position in mortgages and savings and expand Coventry Building Society’s product offerings. The combined group would have a pro forma balance sheet totaling £89 billion as of the end of 2023.

Strategic Benefits of the Merger:

Steve Hughes, CEO of Coventry Building Society, highlighted the strategic alignment and complementarity between the two organizations. He emphasized that the merger would leverage Co-operative Bank’s financial stability, profitable operations, and shared heritage to strengthen the combined entity. This integration is seen as a significant step towards enhancing the value and service provided to members and customers, supported by the strong financial base and capabilities of both organizations.