The Co-operative Bank has received a takeover approach from US private equity firm Cerberus, the latest in a flurry of potential deals in the struggling European financial sector.
The UK lender announced on Tuesday that it had received a non-binding offer from a “financial sponsor with knowledge and experience of investing in European financial services businesses”, which it had passed on to its shareholders and advisers.
People briefed on the talks confirmed it was Cerberus, which owns a 5 per cent stake in German lender, Commerzbank, and this year pushed for a management shake-up and a change in strategy.
Consolidation across the European banking market has long been expected due to the need for substantial cost cuts as ultra-low or negative interest rates hit the sector. Activity has ramped up in recent weeks, with talks between BBVA and Sabadell of Spain announced on Monday night. Sabadell also owns British high street bank TSB.
The Co-op has struggled for more than a decade, since its ill-fated takeover of Britannia Building Society in 2009 exposed it to a large number of bad loans and led to a belated discovery of a £1.5bn capital shortfall in 2013.
It was eventually taken over by bondholders in a £700m rescue deal in 2017.
Last month the bank promoted chief financial officer Nick Slape to become its sixth chief executive in nine years, taking over from Andrew Bester, who had already started implementing a turnround.
At the time of his appointment, Mr Slape said the business was “proving resilient in these challenging times”.
“The next few years will continue to be key for the Co-operative Bank as we look to build on the progress to date and complete our turnround plan,” he added.
In August, the Co-op announced it would close a quarter of its branches and cut 350 jobs, about 10 per cent of its workforce.
On Tuesday, it said it was in discussions with the unnamed suitor, but that negotiations were at a preliminary stage. Sky News first reported Cerberus as the bidder. Cerberus declined to comment.
In Germany the private equity group launched an attack on Commerzbank’s leadership in June, calling for “significant change at the supervisory board, the management board and the company’s strategic plan” to stop a “downward spiral” caused by what the investor said were bloated costs, low profits and managerial inaction.
Cerberus also owns a 3 per cent stake in Deutsche Bank.
Should BBVA’s approach for Sabadell succeed, TSB would be viewed as a potential disposal for the newly formed business.
European consolidation has also included Spain’s CaixaBank agreeing in September to buy Bankia. That followed Intesa Sanpaolo’s acquisition of Italian rival UBI Banca in the summer, the largest European banking deal in the 12 years since the financial crisis.
Get alerts on Co-operative Bank when a new story is published