Subject to final regulatory approval, Royal London will acquire as limited companies the share capital of the Co-operative Insurance Society, and the Co-operative Asset Management in a deal which will see an upfront cash payment of £39m to CBG.
A further £180m is subject to a deferred payment.
Some 95 per cent of members voted in favour of the acquisition, which is expected to be completed by late summer.
Both companies will be renamed on acquisition as RL (CIS) Ltd, and RLAM (CIS) Ltd respectively. The CIS brand will not transfer to Royal London as it will remain operative for the Co-operative’s general insurance business.
The transaction will see Royal London take on around 117 staff from the CIS part of the business, and a further 53 staff in the asset management division.
Royal London will see its funds under management increase from £50bn to £70bn. Its number of customers of Royal London will increase from 4m to 6m, while the number of policies it manages will increase from 6.8m to 10.3m.
Tim Melville-Ross, chairman of Royal London, said: “The acquisition increases our scale, capabilities, profitability and financial strength. The board believes it will support further our mutual dividend policy which has already seen over £325m allocated to our members accounts since 2007.
“It is transformative and exciting for us and we look forward to welcoming the Co-operative policyholders into Royal London. We become an even more substantial player in the UK life and pensions market and it is a landmark step forward representing significant financial and strategic value to the Group and our members”.
| Background |
The acquisition was initially announced in July 2011 with a binding sale and purchase agreement signed on 18 March of this year. The Co-operative Bank has experienced a turbulent recent history, which saw it pull out of a deal to buy 632 Lloyds Banking Group branches in April, followed by a downgrading by credit ratings agency Moody’s in May, and revelations of a reported capital shortfalls of between £700m to £1.8bn. Bank of England figures for the Funding for Lending scheme announced yesterday, revealed that the mutual borrowed £900m in the first three months of 2013, despite pulling the plug on new lending to businesses. It has now embarked on an internal review designed to turn the bank around. |
The EGM was to be followed this morning by the Royal London’s annual general meeting, the last for Mr Melville-Ross as chairman before his retirement. Rupert Pennant-Rea will succeed him in the post.
