Lloyds’ tumultuous European Commission-mandated disposal of 630 branches has hit another stumbling block after Co-operative Bank, which had agreed in principle to pay around £800m for the unit, abandoned the deal citing a difficult economic backdrop and increasing regulation.
According to a statement released by Lloyds to the London Stock Exchange, the bank will now pursue an initial public offering for the unit, which will be rebranded under the TSB banner and begin operating as a “standalone bank within Lloyds” from this summer.
Lloyds said the listing would likely require sing off from both the UK authorities and the EC and that it therefore does not yet have a timetable for the IPO established.
According to the statement, despite heads of agreement on a deal being signed in summer 2012, Co-op’s board said it could no longer go through the deal given “the impact of the current economic environment, the worsened outlook for economic growth and the increasing regulatory requirements on the financial services sector in general”.
In July 2012, the bank had agreed with Lloyds to buy the branches in a deal for an initial consideration of £350m, and up to an additional £400m in present value – equivalent to around £800m on a nominal basis – based on the performance of the combined banking up to 2027.
The valuation was significantly less than the £2bn price tag that had initially been placed on the unit, which was thought to be the major obstacle to a deal during the first 12 months of negotiations with various parties.
