Co-operative Bank CPBB Lloyds Banking Group Branch Assets

  Co-operative Bank (CPBB) - Lloyds Banking Group Branch Assets

RNS Number : 9994H
The Co-operative Bank PLC
19 July 2012
 



19 July 2012

 

The Co-operative Bank Plc

 

 

 

The Co-operative Group and Lloyds Banking Group agree non-binding heads of
terms for the acquisition of the Verde business

 

The Co-operative Group hails great deal that would mark the biggest shake-up
in high street banking in a generation

 

The Board of The Co-operative Group has agreed to proceed on the basis of
non-binding heads of terms with Lloyds Banking Group ("LBG") in relation to
the acquisition of the "Verde" business. The move by The Co-operative Group
would create a real challenger bank on the High Street with almost 1,000
branches.

 

The Co-operative Group and LBG are now working towards agreeing definitive,
binding documentation, subject to the satisfactory completion of further due
diligence and Board approvals.  Completion of the transaction is expected
before the end of November 2013 and will be conditional on, among other
things, regulatory approvals from the FSA, HM Treasury and the European
Commission.

 

 

 

Highlights

 

·     The Co-operative Group to acquire 632 branches from LBG with an
estimated 4.8m customers, thus creating an enlarged Co-operative Banking
Group, differentiated through the quality of its customer-centric, member-led,
ethically driven, banking model

·     The acquisition meets the recommendation from the Independent Commission
on Banking to create a challenger bank with a market share approaching 7% of
today's UK personal current accounts

·     The transaction would accelerate delivery of The Co-operative Group's
strategy, creating the compelling co-operative alternative with a combined
bank network of almost 1,000 branches across the UK, representing nearly 10%
of  today's UK bank network and 11m customers

·     The acquisition would increase the scope and reach of The Co-operative
Group as a whole and enable The Co-operative Banking Group, through an
extensive branch network, to provide banking services to The Co-operative
Group's wider member and customer base

·     Paul Pester, currently Chief Executive of Verde, would become Chief
Executive of the combined banking business, subject to FSA approval.

 

 

 

Under the heads of terms:

 

·     The Co-operative Banking Group to pay LBG an initial consideration of
£350m; with  a further £400m of additional earn-out payments in present value
terms between completion and 2027, subject to the meeting of certain
performance measures

·     To fund the initial consideration, The Co-operative Group will issue
perpetual subordinated debt of £350m fully underwritten by LBG

·     The Verde business is expected to have a balance sheet as at 31 December
2013 (estimated by LBG) of around £24bn, with fully matched customer assets
and liabilities, leaving no funding gap

·     It is anticipated LBG will initially provide £1.5bn of equity capital to
fund Verde at completion under a standardised capital model.  Under an
advanced capital model and subject to regulatory approval, the equity capital
to be provided by LBG is expected to be in the range of £1.1bn to £1.4bn

·     LBG will also provide access to around £500m of Tier 2 capital

·     The Verde business is estimated to have around £11bn of risk weighted
assets on a standardised basis 

·     LBG will use the TSB as the banking brand for the Verde business and
will make this transition from Summer 2013, prior to completion of the
proposed transaction

·     Once it becomes part of The Co-operative Banking Group, the TSB business
would operate separately for a period of time ahead of integration with the
existing Co-operative Banking Group business

·     The combined bank would ultimately operate on a separated version of the
existing proven LBG IT platform which would be managed by LBG, for the
enlarged Co-operative Banking Group, on a managed service basis, under
commercial market terms

·     It is anticipated that the earliest point at which the migration of the
existing Co-operative Banking systems to the LBG IT platform would begin is
2015

 

The heads of terms is expected to move to a full sale and purchase agreement,
subject to satisfactory completion of due diligence processes and Board and
regulatory approvals. However, agreement may not be reached on a definitive
sale and purchase agreement or, once signed, the agreement may not become
unconditional.  Accordingly, there is no certainty that the proposed
transaction will proceed, or that it will proceed on the terms set out in the
non-binding heads of terms.

 

 

Peter Marks, Group Chief Executive of The Co-operative Group, said:

 

 

"We're delighted to be announcing that we have reached agreement in principle
with Lloyds Banking Group on the terms of this important and transformational
transaction.  This deal would deliver the biggest shake-up in high street
banking in a generation.  Consequently, we believe this would be a great deal
for customers, for the public, for UK banking generally and for The
Co-operative Group, in particular.

 

"It would be a great deal for customers because it would make the services of
our member-owned, customer-led, ethically-driven, bank available to millions
of people we've not been able to serve up until now. 

 

"It would be a great deal for the taxpayer because as well as receiving a fair
price up front, the deal would also mean they would share in the profits of
the enlarged bank for years to come.

 

"So far as UK banking generally is concerned, this would be a great deal
because it would help restore trust in a sector whose image has been badly
tarnished over recent years.

 

"And finally, it would be a great deal for The Co-operative Group, its 20
million customers, its seven million customer-owners and its 100,000 staff,
because it would propel us into the premier league of UK banking. 

 

"The acquisition of the Verde business would significantly advance our growth
strategy, creating a combined bank approaching 7% market share of UK personal
current account customers. That would allow us to really challenge the status
quo on the high street.

 

"Despite the crisis in the financial sector, our bank has continued to go from
strength to strength, coming through the financial crisis in great shape and
maintaining our ethical and socially responsible credentials. Whilst we are
not at the end of the road yet, we are pleased to have reached this important
milestone and look forward to continuing to work with Lloyds Banking Group to
reach a final agreement."

 

 

For further information contact:

Russ Brady           
                                                    Susanna Voyle

Patrick Tooher                                                           Lucy
Legh

The Co-operative Group                                           Tulchan
Communications

Tel:  0161 827 5856 / 0161 903 4187                       Tel:  0207 353 4200

 

 

Notes to Editors:

 

The Verde transaction will consist of:

632 branches (plus 6 non-branch premises)

4.8 million customers including:

4.7 million retail customers

3.1 million current account customers

100,000 business banking customers

754 ATMs

A balance sheet of c. £24bn as at 31 December 2013 estimated by LBG ,with
fully 'matched' customer assets and liabilities

The TSB and Cheltenham & Gloucester (C&G) brands.

 

Notes to Investors:

 

The Co-operative Bank will be available for meetings and calls with investors.
Please contact Rajesh Bhatia via investors@cfs.coop or 020 7977 2474.

 

 

 

 

 

                     This information is provided by RNS
           The company news service from the London Stock Exchange
 
END
 
 
MSCUWSKRUVABAAR -0- Jul/19/2012 06:00 GMT