Investment giant launches bid for the Co-operative Bank

One of the major building societies in Britain, the Coventry Building Society, has made a shock proposal to takeover the Co-operative Bank.

If successful, the deal would essentially convert one of the well-known high street lenders back into a mutual structure.

Sky News has revealed that discussions between the Coventry Building Society and the Co-operative Bank are ongoing, though they have not yet entered into exclusive negotiations.

Coventry’s participation in the Co-operative Bank auction has surprised the industry, as the mutual was not initially considered a likely bidder.

However, experts suggest that a merger of the two entities would create a robust cultural and financial alignment, offering significant support to the cause of financial services mutuals in the UK.

KPMG, the accountancy firm, is advising the Coventry during these discussions.

On Wednesday, the discussed price between the Coventry and the Co-operative Bank, along with their respective advisers, remained uncertain.

Earlier assessments by banking analysts had suggested a potential price in the vicinity of £800 million for the Co-operative Bank.

The Co-operative Bank has attracted interest from various bidders since the auction commenced earlier this year. Shawbrook Bank presented a paper-based offer, while Aldermore Bank withdrew from the process without submitting a formal proposal.

Regulators are being kept well-informed about the ongoing discussions. According to a bank analyst, a Coventry takeover would validate the constructive approach adopted by the Prudential Regulation Authority during the Co-operative Bank’s turbulent period in the last decade.

A successful bid by the Coventry would effectively return the Co-operative Bank to mutual ownership. In 2013, the Co-operative Bank’s attempt to acquire the branch network that later became TSB collapsed amid its own crisis.

The bank, then part of the broader Co-op Group, secured a £1.5bn rescue from American hedge funds.

Subsequently, in 2017, the bank required another bailout from investors, with Bain Capital Credit and JC Flowers taking a 10% stake. The remaining equity is owned by a syndicate of hedge funds.

Previous discussions about selling the Co-operative Bank to Cerberus Capital Management fell through in December 2020. In the fall of 2021, the Co-operative Bank explored a merger with Spanish-owned TSB, but the talks did not progress.

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