Coventry Building Society announced it has entered into an “exclusivity agreement in relation to a possible offer” for Manchester-based Co-operative Bank Holdings Limited.
Such a deal that would return the private equity-owned Co-op Bank to mutual ownership.
“The society has entered into this agreement following preliminary discussions between the parties in order to carry out due diligence and to continue engagement,” said Coventry.
“At this time, there is no certainty that any transaction will occur, nor as to the terms on which any transaction might be concluded.
“A transaction will only be pursued if it is determined by the society’s board to be in the best interests of current and future members.
“Further announcements will be made if and when appropriate.”
The announcement follows speculation that Coventry had made a non-binding offer for Co-op Bank that values the lender at roughly £700 million.
Analysts have said a deal would result in a merged group with about £90 billion in assets.
Coventry is the UK’s third largest building society by assets and has about two million members. For the year to June 30, 2023, its mortgage balances grew by £800 million to £48.8 billion and its savings balances grew by £3.2 billion to £45.5 billion.
Co-op Bank said in a statement: “The Co-operative Bank Holdings Limited and The Co-operative Bank p.l.c. updates on the progress of its strategic review announced with the bank’s Q3 trading update on 8 November 2023.
“The bank confirms that, following receipt of non-binding proposals from potential acquirers, it has entered a period of exclusive discussions with Coventry Building Society.
“This period of exclusivity will enable the society and the bank to better evaluate the merits of a combination.
“There is no certainty that these exclusive discussions will result in a transaction. A further update will be provided in due course.”
Co-op Bank provides a range of banking products and services to about 2.5 million retail customers and 94,000 small and medium sized enterprises (SMEs).