One of the major lenders for small businesses in the UK is in the early stages of planning a potential £3.5 billion merger with the Co-operative Bank.
Shawbrook Group has recently approached the Co-operative Bank’s owners with initial proposals for a stock-based merger between the two entities.
Insiders have revealed that this preliminary proposition is an attempt by Shawbrook to preempt a complete auction of the former division of the Co-op Group.
As part of this approach, Shawbrook has put forward an offer that would grant Co-operative Bank shareholders approximately 29% ownership in the combined banking entity. This proposal would value the target company at around £800 million.
To navigate this potential merger, Shawbrook has enlisted the services of Barclays investment bankers, who will provide advisory support for their interest in this alliance with their smaller, consumer-focused counterpart.
However, it’s important to note that insiders believe this initial offer is unlikely to result in further negotiations before the broader auction process takes place.
While Shawbrook’s intention for a Co-operative Bank takeover remains unchanged, the company is anticipated to be actively involved in the upcoming formal auction process, which is set to commence as early as next month.
In terms of financial performance, the combined figures from Shawbrook and the Co-operative Bank indicate an underlying profit of nearly £375 million for the previous year.
Should a merger between Shawbrook and the Co-operative Bank materialize, it would rank as one of the most significant deals within the banking sector since the 2008 financial crisis.