Steve Hughes – chief executive of Coventry Building Society

The deal, valued at up to £780 million, follows exclusive talks between the two entities since mid-December. Pending definitive agreements, the acquisition is poised to reshape both institutions, creating a financial group with an £89 billion balance sheet.

The acquisition extends Coventry’s reach beyond its core offerings of savings and mortgages, venturing into personal current and business accounts. This expansion underscores Coventry’s strategic growth ambitions and positions it as a major player in the banking sector.

Notably, the acquisition marks a return to mutual ownership for Co-op Bank, which had severed ties with The Co-operative Group following financial crises and subsequent bailouts.

Previous ownership by hedge funds and private equity firms, including JC Flowers and Bain Capital, will transition to Coventry, with a pledge to incorporate Co-op Bank customers into the building society’s membership over time.

Coventry’s proposed offer includes a deferred payment of up to £125m contingent on Co-op Bank’s future performance. This financial arrangement reflects confidence in Co-op Bank’s turnaround under the leadership of Nick Slape, who has steered the institution back to profitability since taking the helm in 2020.

The acquisition, though significant, mirrors a broader trend of mutuals expanding through strategic acquisitions in the banking sector. Just last month, Nationwide announced its £2.9bn acquisition of Virgin Money.

Steve Hughes, chief executive of Coventry Building Society, expressed optimism about the acquisition, citing its potential to pave the way for a prosperous future. However, the transaction’s impact on Coventry’s existing members, who will not be granted a vote on the takeover, remains a point of contention.