Co-op scraps Lloyds deal
THE Co-operative Group has pulled out of its planned deal to buy 630 bank branches from Lloyds.
In a stock market statement chief executive Peter Marks said the transaction, known as Project Verde, was not in the best interests of the Manchester-based mutual’s members “at this time”, given the wider economic environment and increasing regulatory requirements for the financial services sector.
Lloyds now plans to rebrand the branches as TSB and operate it as a standalone bank that will be sold through a stock market flotation.
Mr Marks said: “Against the backdrop of the current economic environment, the worsened outlook for economic growth and the increasing regulatory requirements on the financial services sector in general, the Verde transaction would not currently deliver a suitable return for our members within a reasonable timeframe and with an acceptable level of risk.”
Last summer, the Co-op agreed to pay £350m upfront and up to an additional £400m based on the performance of the combined business. But the deal dragged on prompting speculation it was in trouble due to problems ranging from technical IT issues to the state of the economy. Last month the Co-op reported a £600m loss in its banking division.
The assets were put up for sale to meet EU state aid rules imposed on Bank of Scotland, which Lloyds acquired in 2008, as a result of its bail-out by the UK Government.
Mr Marks added: “The Verde transaction offered a significant opportunity to The Co-operative and the sector as a whole as it would have created a major challenger bank. It was right therefore, for us to explore it in the detailed way we have. We were, however, clear from the outset that Verde was a complex transaction and that this was not the only option open to us to develop our bank.
“We remain committed to driving The Co-operative Group forwards under our clear strategy and, as part of that, we will continue to develop our Bank for the long-term, offering a real alternative on the high street with our strong, established brand and our reputation as a trusted financial services business.”
António Horta-Osório, chief executive of Lloyds Banking Group, said: “We are disappointed that The Co-operative Group is unable to complete this transaction.
“However, we are well advanced in our plans to bring the Verde business to the UK high street during the summer through the TSB Bank, and will now proceed with the option to IPO (initial public offering) the business, subject to the necessary approvals.
“The TSB Bank will be an attractive retail and commercial bank that will have around 630 branches across the UK, a strong management team and will be a real challenger on the high street.”
