Lloyds Banking Group Plc (LLOY) agreed to sell 632 branches to Co-Operative Bank Plc for an initial 350 million pounds ($548 million), as the U.K.’s biggest mortgage lender divests assets to comply with its government bailout.
Co-Op will pay a further 400 million pounds more based on the performance of the business, London-based Lloyds said in a statement today. Lloyds expects to complete the sale of the branches, which include the TSB and Cheltenham & Gloucester brands, in November 2013.
Lloyds has to sell the branches to comply with European Union state-aid rules after receiving a 20.3 billion-pound rescue following the 2008 credit crunch. Lloyds selected Co-Op, a customer-owned lender, as preferred bidder in December over NBNK Investments Plc (NBNK), which offered about 1.5 billion pounds for the branches.
“The bad news is that talk of consideration of 1.5 billion pounds is now history,” wrote Mediobanca SpA in a note to investors. “This shows the tricky spot Lloyds found itself in as a forced seller in a tough market.”
Lloyds declined 0.3 percent to 29.68 pence at 8:24 a.m. in London trading, valuing the bank at 20.9 billion pounds.
Co-Op will acquire 4.8 million customers with 3.1 million checking accounts, providing the combined company with 7 percent of the consumer account market, Lloyds said.
The sale was welcomed by Chancellor of the Exchequer George Osborne as “another step towards creating a new banking system for Britain,” in a statement today. U.K. taxpayers own about 40 percent of the bank.
“Today’s agreement is an important step in meeting our obligations under the mandate sale of branches,” Lloyds Chief Executive Officer Antonio Horta-Osorio said in the statement. “In agreeing to move ahead with the Co-Operative we provide a greater certainty for our customers and our shareholders.”
Bloomberg
