By Pradeep Saran, Sep 17, 2023
LONDON, Sept 14 (Reuters), it was disclosed by three individuals familiar with the matter that the owners of The Co-operative Bank have established an early October deadline for accepting non-binding bids for the British midsize lender. This marks the commencement of the much-anticipated sale process.
During the summer, The Co-operative Bank received expressions of interest from rival banks and financial investors, leading to the sharing of business-related information with multiple potential buyers. However, the bank declined to comment on these developments, as confirmed by a representative for Co-op Bank.
The impending sale is garnering significant attention as it represents one of the initial instances of the consolidation long-awaited among midsize lenders in the United Kingdom. Smaller financial institutions have faced increased scrutiny following a series of bank failures, even as the lending business becomes more profitable due to rising interest rates.
As of the end of December, Co-op Bank possessed a book value of £1.3 billion ($1.6 billion). Notably, listed UK banks typically trade at approximately 60% of their book value, as indicated by Refinitiv Eikon data and Reuters’ calculations.
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Although financial investors have expressed interest, Co-op Bank appears to be more inclined toward a deal with a competitor, according to two individuals privy to the matter. The ultimate valuation of the company will depend on the specific structure of the transaction, as emphasized by one of these sources.
Several institutions, including specialist lenders such as Shawbrook, Aldermore, and Paragon Banking Group, are considering bids with the aim of securing access to lower-cost current account deposits, as mentioned by two of the individuals involved. Furthermore, OSB Group may also be contemplating a bid, but the recent decline in its shares introduces a degree of uncertainty, as highlighted by a fourth source familiar with the situation. It is important to note that Aldermore, OSB, Paragon, and Shawbrook have declined to provide comments on this matter.
The ownership of Co-op Bank is currently divided among several hedge funds, which assumed control of the company during a restructuring process in 2017. Additionally, buyout firms Bain Capital and JC Flowers & Co. have stakes in the bank. While Bain Capital refrained from commenting on this issue, a spokesperson for JC Flowers did not immediately respond to a request for comment.
In a report from April, it was disclosed that the bank and its shareholders, with the assistance of Fenchurch Advisory and PJT Partners, were exploring various strategic options, including a potential sale or initial public offering (IPO). Please note that the exchange rate at the time of this report is £1 = $1.25.
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