Bristol & West, Britain's ninth-largest building society, joined the stampede from mutuality yesterday with its sale to the Bank of Ireland for pounds 600m, as other societies urgently sought to shore up their defences against speculators.
All the Bristol & West's 1.1 million members stand to benefit from the cash and share hand-out, estimated to be worth about pounds 1,000 each, though long-term savers will enjoy higher rewards.
Birmingham Midshires, one of the few remaining building societies of any size, yesterday moved against the speculative rush to open new accounts in the hope of benefiting from eventual windfall conversion payouts by raising the minimum sum needed to open a membership account from pounds 100 to pounds 1,500 in its 17 biggest branches, claiming queues of speculators have been interfering with normal branch business.
In its remaining branches, the threshold has been raised to pounds 500. Chelsea BS said it is actively reviewing its pounds 1,000 minimum investment, and the Leeds & Holbeck is reviewing its membership threshold, currently pounds 500.
The announcement ended months of speculation about the future of Bristol & West, which closed its doors to new speculators last Thursday, and increases the pressure on the dwindling band of big societies still committed to mutuality.
Last week Northern Rock announced plans to convert to bank status, joining HalifaxLeeds, Woolwich and Alliance & Leicester. Two others, National & Provincial and the Cheltenham & Gloucester, have recently been taken over by banks.
Bank of Ireland, Ireland's oldest bank, said the move would generate significant synergies in its UK operations, and could be achieved without recourse to a rights issue.
"The strategic weakness in Britain is that we have not had access to retail. This overcomes that weakness," Pat Molloy, Bank of Ireland's chief executive, said. "Above all, what attracted us was the strong franchise."
Bristol & West's members will vote on the deal early next year, and if approved it could be completed by mid-1997. Under the terms, the Bristol & West will continue to be based in the west of England, and retain its own identity, brands and management structure.
John Burke, chief executive, said there would be no compulsory redundancies. "It offers a perfect opportunity to build on the strength of the Bank of Ireland," he said. The deal will combine Bristol & West with Bank of Ireland Mortgages based in Reading.
Mr Molloy said the pounds 600m acquisition was priced at 1.7 times Bristol & West's net assets, and that the deal would be immediately revenue-enhancing. One City analyst estimated the deal would be earnings-enhancing to the tune of 8 to 9 per cent. "People are very pleased that Bank of Ireland has done something to use up its excess capital," the dealer said.
Mr Molloy and Mr Burke said the deal would help their companies' access to capital, giving Bristol & West the ability to raise wholesale finance while the Bank of Ireland's balance sheet would benefit from the society's cheaper retail funds.
Mr Burke said the Bank of Ireland was the only suitor the building society had negotiated with though others had expressed interest.
"It was such a good fit there was not a need to talk to too many others provided the price was right," Mr Burke said. The society had considered a stock market flotation but in the end decided to seek a merger. The society had reviewed its position as a mutual following the decision by Halifax, the biggest building society, to convert.
He said recent government proposals for new legislation allowing building societies greater access to capital markets, a wider range of products to offer customers and protection from hostile takeovers was "too little too late".
Bank of Ireland shares ended yesterday up 19p at 458p.
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