The society and the bank have signed a share purchase agreement, with the acquisition expected to complete in Q1 2025.
This will create a group with a balance sheet of £89bn, as of 31 December.
The acquisition is expected to allow Coventry Building Society (CBS) to “leverage its financial scale” and “diversified funding base” to invest in its branches and customer services and broaden its footprint.
CBS said it would remain a mutual and was committed to being an independent, member-owned building society.
The Co-op Bank will be integrated into the mutual “gradually over the years” and, during this period, the two will operate under their current brand names.
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In a joint statement issued today, they stated that 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”.
For now, there’s no change for existing customers – whether you’re a saver or a borrower.
Each firm 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 (FSCS) protection, up to £85,000.
But work will be carried out to integrate their services in the future.
The combined group will be led by David Thorburn as chair and Steve Hughes as chief executive.
The Co-op Bank will become a subsidiary of CBS when the acquisition is complete and will operate with a separate independent board following completion.
The cash needed to acquire The Co-op Bank will be funded from CBS’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, having sufficient distributable reserves and subject to board approval.
‘A transformational moment for members and customers’
The mutual’s board said it had “considered carefully” whether a member vote is required.
The statement read: “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.”
However, the acquisition is subject to regulatory approval, though it is expected to complete early next year.
Of the cash consideration, up to £125m will be deferred for three years after completion and subject to the performance of The Co-op Bank.
David Thorburn, chair of Coventry Building Society, said: “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.”
Steve Hughes, chief executive of Coventry Building Society, added: “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.”
In April, the two had reached non-binding terms for a £780m cash acquisition.
Just yesterday, as part of Nationwide’s annual financial results, it confirmed it was making “good progress” on its plan to buy Virgin Money, which it expects to complete in Q4 2024.
