Lloyds set to press ahead with sell-off to Co-op

Verde deal agreed and talks begin after 11th-hour counter bid from NBNK fails

Click to follow
The Independent Online

Lord Levene's attempt to create new force in retail banking was thwarted for a second time last night after Lloyds Banking Group said it planned to sell more than 632 branches to the Co-op in a deal worth up to £1.5bn just hours after a last ditch bid to scupper the tie up.

The City grandee and former Lloyd's of London chairman was the driving force behind the creation of NBNK which hoped to spirit away the branches – being sold as "Project Verde" – after being allowed back into the bidding when its rival appeared to be floundering amid regulatory concerns.

But last night Lloyds said Co-op was again its preferred bidder and would again be granted exclusive talks, appearing to slam the door on NBNK, which had appointed former Northern Rock boss Gary Hoffman to spearhead its bid and pledged to create a traditional "simple" bank.

Lloyds said in a statement: "The Group has made considerable progress with the Co-operative Group on the Verde transaction. The group and Co-op now have an understanding on the commercial terms for the transaction. This is subject to agreeing satisfactory documentation, the approval of their respective boards, and further discussions with the FSA, HMT and the European Commission."

The bank said the exclusivity had been granted to allow it to proceed with negotiations expected to lead to the signing of a much delayed 'Heads of Agreement' between the two institutions.

News of Co-op's apparent victory will come as a bitter blow to Aim listed NBNK, which will now be wound up thanks to the lack of targets.

At its annual meeting, NBNK said it had submitted a revised proposal in a final effort to draw the deal away from Co-op. But the attempt failed and the deal is set to proceed with the latter having satisfied regulators that it can cope with a transaction that will triple its bank's size and make banking by far its biggest business operation.

That will likely see Co-op's existing bank reversed into Verde with capital from its huge retail arm used to underpin the banking operation.

The Verde businesses have 5m customers and combined with Co-op will enjoy a 7 per cent share of the UK current account market, presenting a realistic alternative to existing UK banks. David Fleming, Unite national officer said the union would now seek "assurances that the jobs of staff at the Lloyds branches facing sale to the Co-operative Group will be protected".

He said the protracted talks between the two banks had left 9,000 employees feeling "vulnerable" and wants assurances that there will be no compulsory layoffs, branches closes, or changes to staff terms.

NBNK had previously attempted a takeover the UK businesses of National Australia Bank, which owns theYorkshire and Clydesdale banks, but it floundered after the two sides could not agree on price. NAB has since cut back in this country leaving the banks to their heartlands.

NBNK was unable to bid for Northern Rock's "good" bank as a result of hiring Mr Hoffman, who was appointed to clean up what was left of the bank after it was taken into state hands. As a result, Virgin Money landed the business for £747m, leaving the tax payer with a £400m loss. Like Lloyds, Royal Bank of Scotland was also ordered to sell branches as a result of its bailout by the Government, but they were bought by Banco Santander's UK arm.