Nationwide is paying pounds 85m for UCB Home Loans, which has pounds 2.4bn of mortgage loans and net assets of pounds 30.8m. The price includes pounds 52m of goodwill.
UCB Home Loans will keep its own brand name, its head office in Sutton, Surrey, and most of its 280-strong workforce. It provides mortgages through a network of more than 10,000 independent financial advisers.
UCB Home Loans was launched by the UCB group in 1985. UCB was bought by Compagnie Bancaire, the French specialised lender, in 1986.
Nationwide has formed a subsidiary, Nationwide Home Loans, to buy and administer mortgage books, and the unit has bought four other centralised mortgage books over the past year. The subsidiary has a pounds 384m loan book, and UCB will take over managing the book.
The deal is the UK's biggest acquisition of a centralised lender. UCB Home Loans is bigger than HMC, which Abbey National bought last year, and BNP's mortgage book, which was acquired by Halifax.
Analysts see the deal as the latest stage in the consolidation of an industry born in the 1980s housing boom. Centralised lenders raise funds through the international money markets, whereas building societies traditionally have attracted funds by paying relatively high rates of interest to savers.
Most of the foreign owners of centralised mortgage lenders have sold out because of the poor quality of business they attracted and the big downturn in the UK housing market.
Rob Thomas, an analyst with UBS, said the deal made sense for Nationwide. "The mortgage business is difficult to grow organically, but Nationwide has loads of capital. This is a short cut to growing the business."
Mike Lazenby, Nationwide's head of housing, will become the new managing director of UCB. He said the new unit would have complete operational independence and would compete with Nationwide. He said Nationwide customers would be offered an introduction to UCB only if the society were unable to satisfy the customers' needs.
"We are looking to compete not just on price but by identifying niches and providing quality of service," he said.
UCB home loans made pre tax profits of pounds 8.2m in 1994. At that time, it had a mortgage book worth pounds 2.4bn, comprising 41,669 accounts, including pounds 1.1bn of securitised assets.
Barings acted for Compagnie Bancaire in the sale.
Comment, page 21
The top ten
Lender Mortgage assets
Abbey National 47
Alliance & Leicester 15
Bradford & Bingley 11
(As of yesterday, following
the Nationwide acquisition)