Source: Sharecast
The acquisition, which will create a high street lender with assets of £89bn, will see the private equity-owned Co-op Bank return to mutual ownership.
Under the terms of the cash deal, Coventry will pay £780m for the bank, although up to £125m will be deferred for up to three years, subject to the performance of Co-op Bank during that period.
Coventry and Co-op Bank, which is owned by US firms Bain Capital Credit and JC Flowers, entered exclusive takeover discussions in December before signing non-binding heads of terms in April.
In a joint statement on Friday, the two lenders confirmed a share purchase agreement had been signed, with the deal set to complete in the first quarter of 2025.
Coventry, which was founded in 1884, is currently the UK's third-largest mutual lender, with around 2m members. The Co-op Bank has around 2.5m customers.
Coventry chair David Thorburn said it was a “transformational moment”.
Chief executive Steve Hughes added: “We will be able to deliver value to more people in the coming years. I am excited about the opportunities that lie ahead.”
Nick Slape, chief executive of Co-op Bank, said: “I am proud of what has been achieved in recent years.
"We have successfully transformed and simplified the bank in to one that is now sustainably profitable with a strong capital and liquidity position. This transaction is the natural next step and presents an exciting opportunity.”
In 2009, the Co-op Bank acquired Britannia Building Society. However, the deal left it exposed to a raft of bad loans and a £1.5bn capital shortfall, pushing it close to collapse.
It was eventually rescued by bondholders in 2017, and returned to profit to 2021.
Coventry’s members have not been asked to vote on the deal. The building society said that following “thorough and detailed assessments”, the board has decided a vote was not required.
It mirrors a decision by Nationwide, the UK’s biggest mutual, which has also not consulted members on its agreed £2.9bn of listed bank Virgin Money.