Co-op in Britannia BS takeover talks

mzqa395 · 12 October 2008 at 10:30AM

Co-operative Financial Services is in 'early' takeover talks with Britannia, the country's second-largest building society.

If a deal is agreed, it will create a £70bn financial giant with more than nine million customers and 13,000 staff. The deal could also lead to the disappearance of Britannia from the high street as Co-op - the financial arm of the supermarkets to funerals group - looks to take on the UK's main retail banks.
No customers of either mutual will receive windfall bonuses and complicated votes must take place before they can merge.
But the Financial Mutuals Arrangements Bill, currently passing through Parliament, would remove that obstacle. It could become law by the end of the year.
Britannia officials insisted last night that the talks, which have been going on for a couple of months, had not been triggered by the society's ailing financial health which saw profits dip sharply in the first half of this year. But credit rating agency Fitch assesses the Staffordshire-based society's outlook as 'negative'.
And its first-half profits for 2008 fell £31.2m to £50.5m, mainly as a result of mounting mortgage arrears - forcing it to take a bad debt provision of £40.4m.
One Britannia official said: 'This is not a response to the credit crunch. This is about two like-minded organisations talking about a possible coming together. Of course Britannia has some local difficulties but they're nothing compared to the carnage that is taking place elsewhere among UK banks.
'We're financially strong and we're attracting savers' money as a result --10m of it a day.' Britannia's strength lies in its 245 branches and 2.7m savers.
Co-op, which runs the successful internet bank Smile and is a big provider of insurance and pensions, nearly doubled profits to £73.4m in the first half of this year.
It is one of the few financial services companies still to have an insurance sales force and the wider Co-op group is a substantial player in funerals, food stores, pharmacies and travel.
It is understood advisers have been involved in the negotiations for the past couple of months - Citibank for Britannia and JP Morgan for Co-op.
The chief executives of both mutuals, Co-op's David Anderson and Britannia's Neville Richardson, both back the deal. Last night Mr Richardson said: 'Yes, we're in exploratory talks with the Co-operative as to how best we can do business together.

This may result in a coming together - it may not. It might be we simply work more closely together sharing our respective strengths.'
A Co-op spokesman said: 'We have ambitious growth plans and have had discussions with a number of parties including Britannia about how we can work more closely together for our mutual benefit.
'There are clearly a range of possibilities open to us but we will only take action which benefits further the clear momentum occurring now within the co-operative and mutual sector.'
Britannia sponsors Premiership football club Stoke City who play at the Britannia Stadium.
It would be the latest consolidation in the mutual sector which in recent months has seen Nationwide, the UK's largest building society, take over the Derbyshire and agree to take over the Cheshire.
Financial regulators are keeping a close eye on the health of the building society sector.

http://www.thisismoney.co.uk/investing-and-markets/article.html?in_article_id=455210&in_page_id=3&ct=5

baby_boomer · 12 October 2008 at 10:41AM

Here we go again. Another asset sale for £0, "in our mutual interest".

Britannia may have over-reached itself. And to think it persuaded Parliament late last year to legislate to allow building societies to be funded more like banks :rotfl:

The article mentions complicated votes. You bet!

One tickly issue for a merger of Britannia & Co-op bank is that customers of the Co-op bank are not actually members / owners of the mutual that is the Co-op. So how are Britannia members to be compensated if they lose their membership? Or will they change the rules to allow Co-op savers membership of the new organisation?

Something has to be done, because the merger synergies are likely to be in this area.

JayTee99_2 · 12 October 2008 at 10:59AM

Hmmm...this looks interesting, one to keep a close eye on.
got a couple of accounts with them (Britannia)

i think i will need to see a good argument for this, particularly if they aren't offering any windfall.

Oblivion · 12 October 2008 at 11:14AM

I'm rather saddened by this news, but perhaps it's just misplaced sentiment. The Britannia was the very first building society I ever opened an account with more years ago than I care to remember.

Their rates were never going to be market leading but the annual bonuses went some way to make up for this. Perhaps it's because of the name, but I just always assumed they would go on forever as an independant mutual. It would be a shame if their identity were to be swallowed up in large merger.

Dave.

PasturesNew · 12 October 2008 at 11:16AM

Years ago I had a lovely bank account with the Britannia. They paid me interest on my current account.

Then, they got taken over by the CoOp I thought they told me - and my account became a CoOp one. No interest on current accounts. That was about 18 years ago. Since then I've kept meaning to move my account to an interest-paying one and never got round to it.

So it's interesting that the Britannia does still exist... I wonder why they changed my account all those years ago.

Anyway, the CoOp are great as a bank. I've had no problems with them whatsoever. Their online system is easy to use, their telephone banking is prompt. Highly recommended by me.

Milarky · 12 October 2008 at 11:17AM

complicated votes must take place before they can merge. But the Financial Mutuals Arrangements Bill, currently passing through Parliament, would remove that obstacle. It could become law by the end of the year.

This seems to be with reference to this:

3 Transfers between mutuals
(1) The Treasury may by regulations make provision for enabling any specified
mutual to—
(a) transfer its engagements to, or receive a transfer of engagements from,
any other type of specified mutual; or
(b) otherwise transfer the whole or part of its undertaking to, receive such
a transfer from, or engage in any type of reorganisation, restructuring,
scheme or arrangement with any other type of specified mutual,
using the same procedures and complying with the same requirements as
would apply if the transfer, reorganisation, restructuring, scheme or
arrangement, as the case may be, referred to in paragraph (a) or (b) were being
undertaken with, to, from, or in respect of, a specified mutual of the same type.

( http://www.publications.parliament.uk/pa/cm200607/cmbills/023/2007023.pdf )

Britannia Members should still get a vote but they will be asked to vote for a 'merger' with Co-op Bank (which is mutually owned, but not directly I understand, by Co-op 'members' of all Co-ops - since there is a common membership scheme) Complicated indeed. Of course Britannia members will have to be 'persuaded' that this is a good option for them - since 75% still have to vote in favour (again, if I understand correctly) In the past memberships of building societies have shown high levels of trust in the words of their Boards (I remember the merger of Nationwide with Anglia in 1997 which was voted for - and no bonus was offered) but who knows what the level of 'contentedness' is today and whether a 'Trust me' approach will get them through?

baby_boomer · 12 October 2008 at 11:28AM

Oblivion wrote: »

I'm rather saddened by this news, but perhaps it's just misplaced sentiment.

You wouldn't be so saddened if you have been a Staffordshire mortgage customer or Unison member who had bought your house with a Britannia Life mortgage [just about the worst performing endowment mortgage of all time]. These guys gave Equitable a good name :eek:

The society impoverished tens of thousands of people this way.

I wonder if the "Members' Reward Scheme" will be a casualty. Will we even get a bonus this year? It might be wise, since they will need 75% of us to vote yes.

Milarky wrote: »

who knows what the level of 'contentedness' is today and whether a 'Trust me' approach will get them through?

A valid point. It's going to be an interesting PR exercise. Do they say Britannia is financially strong - justifying directors' windfalls even though members get £0.

Or do they say that Britannia is a busted flush. Justifying the £0 to members but making it trickier to justify their own windfalls?

baby_boomer · 12 October 2008 at 12:49PM

baby_boomer wrote: »

Or do they say that Britannia is a busted flush. Justifying the £0 to members but making it trickier to justify their own windfalls?

Looks like they've rejected plan B and gone for plan A.

Britannia press release

"Both businesses have been pursuing successful strategies and don’t need to merge, but we recognise we could be even more successful by coming together and creating the UK's most trusted financial services business."

Satscene · 12 October 2008 at 1:12PM

PasturesNew wrote: »

Anyway, the CoOp are great as a bank. I've had no problems with them whatsoever. Their online system is easy to use, their telephone banking is prompt. Highly recommended by me.

Absolutely!!

Smile have been the best online bank i`ve come accross, only downside is their somewhat meagre interest rates...

on the other hand that`s maybe why they`re in such a strong position these days

baby_boomer · 12 October 2008 at 1:20PM

Co-op bank forced to write down £32 million from SIVs in 2007

And that was before these deadly Structured Investment Vehicles really turned toxic.

They have been reducing exposure, however.

Milarky · 12 October 2008 at 2:55PM

Britannia said the talks were at a very early stage and would cover a wide range of options as to how the two organisations could work together, including a possible future merger.This would be enabled through the introduction of measures contained in the Building Societies (Funding) & Mutual Societies (Transfers) Act – known as the Butterfill bill, after its sponsor Sir John Butterfill MP. The legislation should be in place by the end of this year. A merger would also have to be approved in a vote by Britannia's members.

http://www.britannia.co.uk/home/news/news_releases/2008_10/position_statement.html

Look out for the backsliding in that case. By simply having this vague idea of quasi-merger 'out there' on the table until the end of the year (relying on the timetable to pass the legislation) they invite public comment - and a certain degree of ridicule - for several months at least before any merger vote by Britannia members. I'm not saying that they can't stitch this up with the progranda resources of the Boardroom - they probably can rely on trusting (slightly frightened) members to vote for this - and a large degree of apathy too - to steer it through. But it's not a fait accompli either - and a far cry from Nationwide's easy victory of Cheshire and Derbyshire. [BTW they didn't want the members of two societies both writing to the FSA at the same time; Derbyshire's 'consultation' exercise has already closed whilst Cheshire members have still to be officially notified that they can write to the FSA...]

I just see this as a hostage to fortune - should something 'big' slip out of either of these companies as a result of the next three stormy months...

In fact...

"Talks are at an early stage and no decisions have been taken, so it’s too soon to talk about what changes might arise for our customers and employees. We can say that we remain committed to our Leek, Staffordshire base, our extensive branch network and our strong Britannia brand."

So it's still 'early'. Why announce? Doesn't that suggest they've announced it now precisely because they're worried by the febrile climate - and the news coming out in a more damaging way it they didn't say something now?

Co-op in Britannia BS takeover talks

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