NOT
FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART,
DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO
DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR
REGULATIONS OF SUCH JURISDICTION.
THIS
ANNOUNCEMENT CONTAINS INSIDE INFORMATION.
FOR
IMMEDIATE RELEASE
24
May 2024
JOINT STATEMENT REGARDING THE
CASH ACQUISITION
of
THE CO-OPERATIVE BANK
HOLDINGS P.L.C.
by
COVENTRY BUILDING
SOCIETY
1
Introduction
The Boards of Coventry Building
Society ("CBS" or the "Society") and The Co-operative Bank Holdings
p.l.c. (the ultimate holding company of The Co-operative Bank
p.l.c. (the "Bank")) ("Bank Holdings") are pleased to announce that
the Society and major owners of Bank Holdings (the "Sellers"),
collectively holding approximately 88% of the A shares and 100% of
the B shares in Bank Holdings, have signed a share purchase
agreement ("SPA") under which the Society will acquire the entire
issued share capital of Bank Holdings (the "Acquisition"). Bank
Holdings' shareholders will, in accordance with Bank Holdings'
Articles of Association and the terms of the SPA, be entitled to
receive a total cash consideration of £780 million (subject to
customary post-completion price adjustments and the terms of the
SPA). Of the total cash consideration, up to £125 million will be
deferred for a period of 3 years from completion subject to the
future performance of the Bank and the terms of the SPA.
Subject to satisfaction of the
conditions set out in paragraph 9 below, the Acquisition is
expected to complete in the first quarter of 2025.
2
Strategic rationale
A combination between the Society
and the Bank is expected to both deepen the enlarged group's
existing presence in mortgages and savings and extend the Society's
propositions. The CBS Board believes that the Acquisition is in the
best interests of current and future members of the Society. It
will:
· Create
a combined group with a pro forma balance sheet of £89 billion as
at 31 December 2023;
· Allow
the Society to leverage its financial scale and a diversified
funding base to:
-
Continue to offer strong member value;
and
-
Enhance investment to continue to deliver
outstanding service across branches, online, telephone and mobile
services;
· Provide CBS with an established position in the personal
current account market, extending the Society's product proposition
to meet more of members' daily needs;
· Broaden the Society's channels and distribution capabilities
including an enlarged, national branch footprint; and
· Introduce a business banking proposition into the Society's
offering.
CBS is wholly committed to being an
independent, member-owned building society with the purpose of
making people better off through life by offering the best value
products and services it can to its members. CBS will remain a
building society following completion of the Acquisition and is
committed to continuing to play an important role in maintaining a
strong mutual sector.
3
Integration
The Society will seek to integrate
the Bank gradually over several years, prioritising good customer
outcomes following the completion of detailed planning and
engagement with relevant stakeholders. During this period,
the Society and the Bank will continue to operate under their
current names and branding while the work required to provide more
integrated services in the future is carried out.
Each of CBS and the Bank will retain
their respective banking licences during this initial phase, and so
members and customers of each organisation will continue to have
the same Financial Services Compensation Scheme
protection.
4
Governance and people
The combined group will be led by
David Thorburn as Chairman and Steve Hughes as Chief Executive
Officer.
The Bank will become a subsidiary of
the Society on completion of the Acquisition and will continue to
operate with a separate independent board post
completion.
The Society and the Bank share a
common heritage and values which are represented by highly engaged
and talented colleagues in both organisations. The Society believes
that the overall colleague base is well-positioned in terms of
skills and capabilities to meet the current demands of members and
customers and deliver the enhanced growth prospects of the combined
group.
Appropriate priority will be given
to colleague communication and engagement while combining the two
organisations. There will inevitably be change over time but
this will be underpinned by the strong organisational values in
place. The combination of these two organisations and continued
investment will provide opportunities for personal and career
development and the Society sees its colleagues in the enlarged
group as the foundation of a strong and successful
business.
5
Customers and future membership position
The combined group's customers will
benefit from the enlarged range of products and propositions on
offer. It is the Society's current intention that eligible Bank
customers will become Society members over a period of time post
Completion.
6
Member vote
The CBS Board has considered
carefully whether a member vote is required. Having had regard to
the requirements of the Building Societies Act 1986, and, following
thorough and detailed assessments and professional advice, the
Board has conclusively determined that a member vote is not
required. In coming to this decision, the CBS Board has been
informed by member surveys and focus groups which clearly signalled
their priorities as maintaining our value proposition and service
quality.
7
Current trading
Further to the Society's Annual
Results announcement made on 29 February 2024, the Society
continues to trade well and in line with expectations.
As disclosed in its First Quarter
Trading Statement on 2 May 2024, the Bank's financial performance
for the period ended 31 March 2024 was in line with expectations
with no change to full year guidance.
8
Other matters
The Acquisition represents an
implied multiple of 0.6x the Bank's tangible book value as at 31
December 2023. The cash consideration necessary to satisfy
the Acquisition in full will be funded from the Society's existing
cash resources at completion.
In line with its existing policy,
the Bank expects to pay a dividend in FY24 subject to meeting
capital requirements and having sufficient distributable reserves,
subject to Board approval.
Leverage would become the combined
group's binding capital constraint and CBS expects the combined
group to have a strong pro-forma capital position with a leverage
ratio of approximately 4.4% and a common equity tier 1 ratio of
approximately 21%, comfortably above the applicable regulatory
minimums.
CBS also expects the combined
group's liquidity ratios to be well in excess of regulatory
requirements.
These estimated pro-forma positions
are illustrative only and have been calculated using unaudited
estimates of the position as at 31 December 2024 prepared by CBS.
More information in relation to these estimates is set out in
Appendix 1 to this announcement.
The combined group will be subject
to the consolidated supervision of the PRA.
9
Conditionality, termination and break fees
The Acquisition is subject to
regulatory approval from both the PRA and FCA. The Acquisition is
not subject to any condition relating to the passing of a
resolution by the Society's members.
The SPA contains customary
termination provisions, including for certain material adverse
change events and, in limited circumstances, non-satisfaction of
conditions in accordance with the terms of the SPA. In certain
limited circumstances, upon the termination of the SPA, a break fee
may become payable by CBS.
************
Chairman of Coventry Building Society, David Thorburn
commented:
"I believe this is a
transformational moment for members and customers of the Society
and The Co-operative Bank. We're building on our shared heritage
and creating a stronger mutual business that will deliver in the
best interests of our current and future members."
Chief Executive Officer of Coventry Building Society, Steve
Hughes commented:
"By bringing together Coventry
Building Society and The Co-operative Bank we will be able to
deliver more value to more people in the coming years. I am excited
about the opportunities that lie ahead, most importantly, our
ability to sustain the great value and outstanding service that
matters most to our members."
Chairman of The Co-operative Bank Holdings p.l.c., Bob Dench
commented:
"This transaction sees The
Co-operative Bank returning to mutuality. I am very proud of
all those who have worked so hard over so many years to rebuild the
Bank. I am sure the Coventry Building Society will prove to be a
very good home for us."
Chief Executive Officer of The Co-operative Bank Holdings
p.l.c., Nick Slape commented:
"I am proud of what has been achieved
in recent years. We have successfully transformed and simplified
the Bank into one that is now sustainably profitable with a strong
capital and liquidity position. This transaction is a natural next
step and presents an exciting opportunity."
Enquiries to:
Coventry Building Society
Richard Field, Head of
Communications
0800 121 6868
KPMG
LLP (financial adviser to the Society)
+44 (0)20
7311 1000
Matthew Watkins
J.P.
Morgan Cazenove (financial adviser to the Society)
+44 (0)20 3493
8000
Claire Brooksby
The
Co-operative Bank Holdings p.l.c.
Alasdair Todd / Neil Bennett,
H/advisors Maitland:
+44 (0)20 7379 5151
Angela Catlin, Head of Investor
Relations:
+44 (0) 7548 965 042
Fenchurch Advisory Partners (financial adviser to the
Bank)
+44 (0)20 7382 2222
Kunal Gandhi
Tom Murphy
Aleem Meghji
PJT
Partners (financial adviser to the Bank)
+44 (0)20 3650 1100
Basil Geoghegan
Constantino Álvarez del
Río
Marco Raimondo
Addleshaw Goddard LLP is acting as
legal adviser to the Society in connection with the
Acquisition.
Freshfields Bruckhaus Deringer LLP
is acting as legal adviser to Bank Holdings in connection with the
Acquisition and Paul Hastings (Europe) LLP is acting as legal
adviser to the Sellers in connection with the
Acquisition.
Information on Coventry Building Society
Coventry Building Society is an
award-winning savings and mortgage provider, currently the 8th
largest UK lender with mortgage balances at £50.3bn at the end of
2023. As a mutual, it is owned by and run for the benefit of its
members (customers with an eligible savings account or mortgage).
It has around 2 million members across the country.
The Society employs more than 3,000
colleagues and has been consistently recognised for being a great
workplace. In 2024 it was named as 11th on the list of best
super-large companies to work for in the UK by Great Places to
Work. It has also been recognised as a Great Place to Work for
women, for wellbeing, and as one of the best workplaces in
financial services and insurance.
In 2023, the Society became the UK's
first BCorp certified building society. B Corp is a globally
recognised certification for companies that meet high standards of
social and environmental performance, accountability, and
transparency, and are run for the benefit of all people,
communities, and the planet.
Following the acquisition, CBS will
remain a building society.
Information on The Co-operative Bank Holdings
p.l.c.
The Co-operative Bank p.l.c.
provides a range of banking products and services to about 2.5m
retail customers and c.94k small and medium sized enterprises
('SME'). The Bank is committed to values and ethics in line with
the principles of the co-operative movement. The Co-operative Bank
is the only high street bank with a customer-led Ethical Policy,
which gives customers a say in how their money is used. Launched in
1992, the policy has been updated on six occasions, with new
commitments added in June 2022 to cover what we do for our planet,
people and the community.
The Co-operative Bank p.l.c. is
authorised by the Prudential Regulation Authority and regulated by
the Financial Conduct Authority and the Prudential Regulation
Authority. The Co-operative Bank p.l.c. eligible customers are
protected by the Financial Services Compensation Scheme in the UK,
in accordance with its terms.
Inside information
This announcement contains inside
information as stipulated under Article 7 of the Market Abuse
Regulations (EU) No.596/2014 and forms part of the law of the
United Kingdom by virtue of the European Union (Withdrawal) Act
2018. Upon the publication of this announcement via a regulatory
information service, this inside information is now considered to
be in the public domain.
Cautionary note regarding
forward-looking statements
This announcement (including information incorporated by
reference into this announcement), statements made regarding the
Acquisition, and other information published by CBS and/or Bank
Holdings, contain statements which are, or may be deemed to be,
"forward-looking statements". Forward-looking statements are
prospective in nature and not based on historical facts, but rather
on current expectations and projections of the management of CBS
and/or Bank Holdings about future events, and are therefore subject
to risks and uncertainties which could cause actual results to
differ materially from the future results expressed or implied by
the forward-looking statements.
The forward-looking statements contained in this Announcement
include statements with respect to the financial condition, results
of operations and business of Bank Holdings and certain plans and
objectives of CBS with respect thereto and other statements other
than historical facts. Often, but not always, forward-looking
statements can be identified by the fact that they do not relate
only to historical or current facts and may use words such as
"anticipate", "target", "expect", "estimate", "forecast", "intend",
"plan", "budget", "scheduled" "goal", "believe", "hope", "aims",
"continue", "will", "may", "should", "would", "could", or other
words of similar meaning. These statements are based on assumptions
and assessments made by the relevant parties in light of their
experience and their perception of historical trends, current
conditions, future developments and other factors they believe
appropriate. By their nature, forward-looking statements involve
known and unknown risk and uncertainty and other factors which may
cause actual results, performance or developments to differ
materially from those expressed in or implied by such, because they
relate to events and depend on circumstances that will occur in the
future. Although CBS and Bank Holdings believe that the
expectations reflected in such forward-looking statements are
reasonable, no assurance can be given that such expectations will
prove to have been correct and you are therefore cautioned not to
place undue reliance on these forward-looking statements which
speak only as at the date of this Announcement.
Neither CBS nor Bank Holdings assumes any obligation to update
or correct the information contained in this Announcement (whether
as a result of new information, future events or otherwise), except
as required by applicable law.
There are a number of factors which could cause actual results
and developments to differ materially from those expressed or
implied in the forward-looking statements including, but not
limited to: the enactment of legislation or regulation in the
countries in which the parties operate that may impose costs or
restrict activities; the renegotiation of contracts or licences;
the ability to obtain requisite regulatory approvals and the
satisfaction of other conditions on the proposed terms; changes in
government policy and taxation; industrial disputes; war and
terrorism. Other unknown or unpredictable factors could cause
actual results to differ materially from those expected, estimated
or projected in the forward-looking statements. If any one or more
of these risks or uncertainties materialises or if any one or more
of the assumptions proves incorrect, actual results and
developments may differ materially from those expected, estimated
or projected. Such forward-looking statements should therefore be
construed in the light of such factors.
Neither CBS nor Bank Holdings, nor any members of their
respective groups, nor any of their respective associates or
directors, officers or advisers, provides any representation,
assurance or guarantee that the occurrence of the events expressed
or implied in any forward-looking statements in this announcement
will actually occur. Given the risks and uncertainties, you are
cautioned not to place any reliance on these forward-looking
statements. Other than in accordance with their legal or regulatory
obligations, neither CBS nor Bank Holdings is under any obligation,
and each of CBS and Bank Holdings expressly disclaim any intention
or obligation, to update or revise any forward-looking statements,
whether as a result of new information, future events or
otherwise.
Disclaimers
KPMG LLP ("KPMG"), which is authorised and regulated in
the UK by the FCA, is acting exclusively as financial
adviser to the Society and no one else in connection with the
matters set out in this Announcement and will not regard any other
person as its client in relation to the matters in this
Announcement and will not be responsible to anyone other than the
Society for providing the protections afforded to clients of KPMG,
nor for providing advice in relation to any matter referred to
herein. Neither KPMG nor any of its affiliates, respective
directors, officers, employees and agents owes or accepts any duty,
liability or responsibility whatsoever (whether direct or indirect,
whether in contract, in tort, under statute or otherwise) to any
person who is not a client of KPMG in connection with the matters
referred to in this Announcement, or otherwise.
J.P. Morgan Securities plc, which conducts its UK investment
banking business as J.P. Morgan Cazenove ("J.P. Morgan Cazenove"),
is authorised in the United Kingdom by the PRA and regulated in the
United Kingdom by the PRA and the FCA. J.P. Morgan Cazenove is
acting as joint financial adviser exclusively for CBS and no one
else in connection with the matters set out in this announcement
and will not regard any other person as its client in relation to
the matters in this announcement and will not be responsible to
anyone other than CBS for providing the protections afforded to
clients of J.P. Morgan Cazenove or its affiliates, nor for
providing advice in relation to any matter referred to
herein.
Fenchurch Advisory Partners LLP ("Fenchurch"), which is
authorised and regulated by the Financial Conduct Authority (the
"FCA") in the United Kingdom, is acting as financial adviser to the
Bank and for no one else in connection with the transaction and
will not be responsible to anyone other than the Bank for providing
the protections afforded to clients of Fenchurch Advisory Partners
LLP nor for providing advice in relation to the transaction or any
other matter referred to in this document.
PJT Partners (UK) Limited ("PJT Partners") which is authorised
and regulated by the Financial Conduct Authority in the United
Kingdom is acting exclusively for the Bank and no one else in
connection with the matters described herein and will not be
responsible to anyone other than the Bank for providing the
protections afforded to clients of PJT Partners or for providing
advice in connection with the matters described herein. Neither PJT
Partners nor any of its subsidiaries, branches or affiliates owes
or accepts any duty, liability or responsibility whatsoever
(whether direct or indirect, whether in contract, in tort, under
statute or otherwise) to any person who is not a client of PJT
Partners in connection with this announcement, any statement
contained herein or otherwise.
Appendix 1
BASES AND
SOURCES
1) In paragraph 8 of
this announcement, the implied multiple of 0.6x the Bank's tangible
book value as at 31 December 2023 is based on:
· A total
consideration of £780 million; and
· Tangible book value of the Bank of £1,295 million calculated as
total equity less intangible as set out in its 2023 Annual Report
& Accounts.
2) The information regarding the estimated pro-forma consolidated
capital, leverage and liquidity position of the combined group, as
set out in paragraph 8 of this announcement, represents unaudited
estimates prepared by the Society using relevant information
relating to the Society and the Bank as at 31 December 2023,
adjusted to reflect relevant estimated Acquisition-related costs
and other adjustments and CBS management's unaudited estimates of
the position as at 31 December 2024, including expected fair value
adjustments and incremental capital issuance. These estimates have
been prepared for illustrative purposes only and, by their nature,
they do not necessarily represent the actual positions which will
exist following Completion. The inclusion of negative
goodwill in the actual consolidated capital ratios will be subject
to prior verification in accordance with the Prudential
sourcebook.
3) Certain figures included in this announcement have been
subject to rounding adjustments.
