One of Britain’s biggest challenger banks has abandoned plans to bid for the Co-operative Bank after its owner’s chief executive quit unexpectedly.
Sky News understands that the Aldermore Group, which had hired consultants working on a takeover of its rival mid-sized lender, opted not to make an offer before a deadline earlier this month.
Its withdrawal will come as a surprise and will raise questions about its future strategy under Steven Cooper, its respected chief executive.
Analysts had named Aldermore as the most logical strategic buyer of the Co-operative Bank, although City sources said on Wednesday that a number of other parties remained interested in bidding.
Aldermore’s plans are said to have been derailed by a leadership shake-up at FirstRand, the South African banking group that owns it.
Other lenders mentioned as potential bidders, including Paragon Banking Group and OneSavings Bank – have also yet to submit offers.
Shawbrook, another mid-sized UK bank, has approached Co-operative Bank’s advisers with a £3.5bn merger proposal.
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However, it is largely made up of Shawbrook shares and it was unclear how attractive the offer would be to Co-op Bank shareholders, according to banking sources.
A successful sale of the formerly mutually-owned Co-op Bank would come as a relief to regulators who have twice had to play roles in bailouts over the past decade.
In 2013, Andelsbanken’s bid to acquire the branch network that became TSB collapsed as the extent of its own crisis emerged.
It was forced to turn to US hedge funds to secure a £1.5 billion rescue, while its former chairman, Paul Flowers, was left humiliated by tabloid revelations about his private life.
The lender then needed a further bailout from investors in 2017, with two major investors – Bain Capital Credit and JC Flowers – subsequently taking a 10% stake in the company.
The rest of the equity is held by a syndicate of hedge funds, and the bank’s performance has improved radically under the current management.
Previous talks about a sale of the Co-operative Bank to Cerberus Capital Management, an often controversial investor, collapsed in December 2020.
The auction continues amid turmoil in the wider sector, with Metro Bank having to turn to the debt and equity markets in recent weeks to raise emergency funding.
PJT Partners and Fenchurch Advisory Partners advise on the cooperative bank sale.
Aldermore and Co-operative Bank declined to comment.