‘Hedge funds eyeing Co-op Group’s bank stake’
SPECULATION is mounting that US hedge funds which have invested in The Co-op Bank, are keen on buying the Co-operative Group’s remaining stake in the lender.
Citing sources The Times said the hedge funds are exploring a potential future sale or merger of the business with one of Britain’s growing band of challenger banks.
“There are a number of shareholders who would potentially be interested in acquiring the group’s shares,” one US hedge fund manager with a holding in the bank was quoted as saying,
Under an deal struck at the time of the Co-op Bank’s bondholder bailout last year, if the Co-op Group stake fell below 20%, the Manchester-based lender would lose the automatic right to use its former parent’s brand name.
Regarding a sale or merger of the bank with another challenger lender, one leading Co-op Bank shareholder, who asked not to be named, said that there was interest among investors in talking to TSB, the lender that was spun out of Lloyds Banking Group last year and was bought this year by Sabadell, the Spanish banking group.
A tie-up with TSB would mark a twist in the Co-op’s fortunes, because it would come two years after the lender was forced to abandon the acquisition of the 631-branch TSB weeks before the discovery of a £1.5bn black hole in its finances. Its financial woes led to the Co-op ceding control to a consortium of debt investors led by several American hedge funds and also forced the sale of the Manchester-based organisation’s pharmacies and farms business.
“Sabadell and TSB are to us one of the most logical partners and we would hope to see some kind of progress in the next 12 months,” a US-based hedge fund manager, who asked not to be named, added.
Another Co-op Bank investor said: “If the plan is to stick with a flotation, we’re going to have to wait a couple of years, whereas a trade sale could happen far sooner. I think there are real economies of scale to a deal with TSB.
Since being rescued, the Co-op Bank has shrunk and is on course to close more than 100 branches as its management team tries to cut costs and turn around the business.
The Co-op Group declined to comment.
According to the Co-op Group’s accounts, the mutual values its Co-op Bank holding at £224m.
