As per a Sky News report, the Co-operative Bank was approached by Shawbrooks Groups in recent weeks with detailed intentions for a stock-based merger of the two companies.
According to sources, Shawbrook’s preliminary proposal this weekend was an attempt to pre-empt a complete auction of the former division of the Co-op Group.
As per the merger, Shawbrooks is offering the Co-operative Bank shareholders roughly 29% of the combined banking business in a deal valued at over £800 million, they added.
Shawbrook recently hired investment bankers from Barclays to support it in its pursuit of a smaller, consumer-focused competitor.
One source stated that the initial offer was unlikely to lead to additional discussions before a larger auction.
Shawbrook remains interested in acquiring the Co-operative Bank and is expected to be an active participant in the process, which is expected to begin formally next month.
Last year, Shawbrook and the Co-operative Bank recorded combined underlying profits of approximately £375 million.
Shawbrook and the Co-operative Bank are forming a cooperation that will be among the most prominent banking sector collaborations since the 2008 financial crisis.
It would occur at a time when the market is being supported by higher interest rates while being shaken by the failure of Silicon Valley Bank and the emergency takeover of Credit Suisse by Swiss rival UBS.
Other lenders are anticipated to make formal bids for the Co-operative Bank as well.
OneSavings Bank had long been regarded as one of its most likely suitors, but a recent warning that profitability would be harmed as customers rushed to get new fixed-rate plans has caused some City analysts to doubt if it will offer
Prospective bidders include Aldermore, Nationwide, and Paragon Bank.
Due to its status as a consultant to Shawbrook, Barclays is unlikely to be the only interested party in the Co-operative Bank.
Shawbrook’s owners, private equity firms BC Partners and Pollen Street Capital, have been speculating about a sale that would maximize value for them.
A proposed sale procedure that would have valued Shawbrook at more than £2 billion was put on hold nearly a year ago due to tough market conditions.
The Co-operative Bank approached Spanish-owned TSB regarding a merger in the autumn of 2021, but negotiations fell through.
A successful sale of the historically cooperatively owned bank would be a relief to authorities, who have had to play roles in bailouts twice in the last decade.
When the severity of its crisis became apparent in 2013, the Co-operative Bank’s plan to acquire the branch network that became TSB was shattered.
While its former chairman, Paul Flowers, was made fun of by tabloid revelations about his personal life, the company was forced to turn to American hedge funds for a £1.5 billion bailout.
In 2017, the lender required another bailout from investors, with two significant investors—Bain Capital Credit and JC Flowers—later obtaining a 10% share in the company.
A syndicate of hedge funds owns the remaining shares in the company.
Earlier deliberations on selling the Co-operative Bank to Cerberus Capital Management, a frequently contentious investor, fell through in December 2020.
The Co-operative Bank is being advised on its upcoming sale process by PJT Partners and Fenchurch Advisory Partners.
Shawbrook’s representative refused to comment on Saturday, while the Co-operative Bank was unable to be reached for a response.
- Published By Team Timeswire