Paul Hastings, Freshfields and Addleshaws lead Coventry Building Society’s £780m acquisition of Co-op Bank

Paul Hastings, Freshfields Bruckhaus Deringer and Addleshaw Goddard have been called in to act on Coventry Building Society’s £780m takeover of The Co-operative Bank from hedge fund owners.

Addleshaw Goddard is acting for Coventry Building Society (CBS) on the deal, while Freshfields is advising the Co-op Bank and Paul Hastings is acting for the bank’s sellers, which include JC Flowers and Bain Capital Credit.

The all-cash deal, which will complete in the first quarter of 2025, will create a group with a balance sheet of £89 billion and almost five million customers.

The Paul Hastings team is led by M&A partner Matthew Poxon, along with senior associate Matthew Calvert and associate Silas Raggett. The team also includes financial regulatory partner Nina Moffatt and tax partner Jiten Tank.

Meanwhile, the Freshfields team is led by partners Sundeep Kapila and Nick Jones, supported by senior associates Lisa Flanagan and Bethan Rodden. Other partners working on the matter include Jill Gatehouse (Tax), Holly Insley (Employment), Charles Magoffin (Pensions), Peter Allen (Finance) and Richard Lister (IP/IT), with financial regulatory advice provided by counsel Mac Mackenzie.

The Addleshaw Goddard team acting for CBS is led by Ben Koehne, head of the firm’s building societies and mutuals practice, alongside fellow M&A corporate partners Oliver Broomfield and Hardeep Plahe and a core team including corporate management associates Victor Oderinde , Faye Wiles and Jack Edwards and associates Jemima Clarke and Jagpal Pahal.

The Co-op Bank, which lends to consumers and small businesses, said late last December it was in talks with CBS about a possible merger following non-binding offers from rival bidders.

The deal continues a wave of consolidation this year among UK lenders fighting for market share, including the £2.9bn takeover of Virgin Money by Nationwide, Britain’s biggest building society, with the firms Magic Circle Clifford Chance and Slaughter and May were called to advise the respective parties. .

CBS, which is Britain’s second largest building society, said the Co-op Bank deal would increase its share of the mortgage market and give it a foothold in the personal current account and business banking markets.

CBS will find the purchase from its existing cash reserves, with Co-Op Bank expecting to pay a dividend in the current financial year.

Up to £125 million of the cash in the acquisition will be deferred for three years after the deal is completed, subject to Co-Op Bank’s performance and the terms of the share purchase agreement, CBS said in a statement.

CBS chairman David Thorburn said the tie-up would create “a stronger joint business that will benefit our current and future members.” Thorburn will lead the combined group as chairman alongside chief executive Steve Hughes.

Co-op Bank will become a subsidiary of CBS upon completion of the transaction and will continue to operate with a separate independent board.

KPMG and JP Morgan Cazenove are acting as financial advisers to CBS on the matter, while Fenchurch Advisory Partners and PJT Partners are financial advisers to the Co-op Bank.

News of the acquisition comes amid a surge in global M&A after deals fell to a 10-year low in 2023. Global M&A volume rose 38% in the first quarter compared to the same period last year, to nearly $800 billion, according to LSEG, although deals are taking longer to complete amid tougher regulatory scrutiny.

Freshfields was ranked 14th in the global ranking of M&A legal advisers by deal value in the first three months of the year, working on deals worth almost $50 billion. The firm ranked seventh in the 2023 rankings, having worked on $278.3 billion in transactions, giving it the distinction of being the top firm outside the US.

Paul Hastings and Addleshaw Goddard were not among the top 25 firms included in the rankings for 2023 or Q1 2024.