Coventry Building Society in talks to take over Co-op Bank

Coventry Building Society, one of Britain’s largest building societies, is looking at a takeover of the Co-operative Bank, it was reported on Wednesday.

The proposed merger, reported by Sky News, would effectively remutualise the Co-Op and create a financial services giant with assets nearing £90bn.

Sky said that discussions between the two entities were underway, but they were not in exclusive negotiations.

The combined entity would be comparable to Virgin Money UK, serving around five million customers.

Coventry Building Society, which Sky said was receiving advisory support from KPMG, is ranked third in the UK by assets.

The price under discussion between Coventry and the Co-op was unknown, although banking analysts previously estimated the Co-operative Bank’s value at about £800m.

Coventry Building Society did not comment on the speculations but told Sky it was open to opportunities to enhance its members’ value and services.

Other potential suitors of the Co-operative Bank included Shawbrook Bank, while Aldermore Bank withdrew from the process without submitting a formal proposal.

A successful bid from the Coventry would essentially return the Co-operative Bank to mutual ownership.

In 2013, the Co-op’s bid to acquire the Lloyds TSB branch network that became the independent TSB fell apart amidst its own financial crisis.

At the time, the bank secured a £1.5bn rescue from American hedge funds.

Further financial support was required from investors in 2017, with Bain Capital Credit and JC Flowers acquiring a 10% stake.

A consortium of hedge funds currently owned the majority of its equity.

Discussions about a sale to Cerberus Capital Management in December 2020 failed to reach a resolution, while the Co-op explored a merger with the Banco Sabadell-owned TSB in 2021, although that did not progress.

Reporting by Josh White for Sharecast.com.