The Co-operative Bank could be set for a £3.5 billion merger with Shawbrook Group, one of the UK’s biggest lenders to small businesses.
Shawbrook Group Plc (LSE:SHAW) recently engaged with the Co-operative Bank's owners, outlining a preliminary proposal for a stock-based merger between the two entities, reports revealed.
This move by Shawbrook is seen as an attempt to pre-empt a complete auction of the former Co-operative Group division which gets underway next month.
Offering the Co-operative Bank's shareholders approximately 29% ownership in the merged group, it values the consumer lender at around £800 million.
Despite Shawbrook enlisting Barclays as an advisor for the deal, insiders remain unconvinced that it'll lead to immediate further discussions prior to a broader auction process.
Several potential suitors have been rumoured to be eyeing the institution including OneSavings Bank, Aldermore (AIM:ALD), Nationwide, and Paragon Bank.
OneSavings Bank was considered one the leading contenders, but having reported poor results which saw profits suffer, some analysts aren’t convinced it’ll still make an offer.
Shawbrook itself could be a buyout target for larger banks, as the current owners, private equity firms BC Partners and Pollen Street Capital, could be looking to get a return on their investment soon.