Coventry Building Society is understood to be in talks with the troubled Norwich & Peterborough – the mortgage building society that booked heavy losses due to its exposure in collapsed investment firm Keydata, for a possible takeover bid.
If the deal is successful, the combined entity will become Britain’s third largest mutual with total assets exceeding £23 billion. It is rumored thcoventry builkat Nationwide and Yorkshire – the country’s biggest and second biggest mutuals, have also evinced interest in N&P.
Merger & Acquisitions adviser Gleacher Shacklock – the firm that has already advised Coventry on its earlier takeover of Stroud & Swindon Building Society, has been re-appointed to finalise the possible deal.
Since building Societies are not allowed to tap the stock market to raise fresh capital, a lot of them have taken the merger route to consolidate their balance sheets and augment reserves after the credit crunch.
The biggest player gobbled up Cheshire, Derbyshire and Dunfermline building societies in the past while Yorkshire acquired Chelsea last year.
N&P CEO Matthew Bullock had said earlier this month that the company received multiple proposals without divulging details. Fenchurch Advisory Partners is advising N&P on the possible merger.
Apparently buyout firm JC Flowers had offered to infuse fresh capital in N&P – which the company refused.
N&P faces many potential lawsuits claiming damages from victims of Keydata – N&P had sold Keydata bonds. The Financial Services Authority is also likely to fine N&P on the same ground. Although the Financial Services Compensation Scheme may offer some relief to N&P, its reputation has already suffered in the domestic market.
N&P is the UK’s ninth largest society with total assets under management of £4 billion and 500,000 members while Coventry is Britain’s one of the most profitable mutuals with 1.5 million members and £18.3 billion worth assets.