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RNS Number : 5047Q
Newcastle Building Society
21 February 2023
21 February 2023
Newcastle Building Society and Manchester Building Society
merger update
The Boards of Newcastle Building Society ('Newcastle') and
Manchester Building Society ('Manchester') have agreed heads of
terms to merge by way of a transfer of Manchester's engagements to
Newcastle.
The Boards of both Societies believe it is in their respective
members' best interests to complete the merger in a considered and
timely way, to realise the benefits a merger would afford.
Manchester has not undertaken new lending since 2013, and faces
uncertainty around its long-term future in the absence of a
transaction.
A merger would see Manchester savers and borrowers benefit from
increased product choice and interest rates that are the same as,
or better than, their current ones. As members of the enlarged and
expanding Newcastle they would also be part of a mutual which
continues to grow strongly, and is currently the UK's eighth
largest building society.
Apart from the Manchester Building Society executive directors,
all Manchester Building Society employees would have the
opportunity to further their careers as a valued and continuing
part of a larger organisation. The advantages to both Societies of
a merger include greater resilience and additional capital
strength, which would enhance Newcastle's growth strategy and its
continued commitment to high levels of customer service and
delivery of member value.
The prospect of retaining an operational Manchester base could
provide additional opportunities for a pipeline of talent into the
Newcastle Group, which includes its significant subsidiary fintech
business, Newcastle Strategic Solutions. As the UK's leading
provider of outsourced savings management platforms, the Solutions
subsidiary employs over 700 people.
Chief Executive of Newcastle, Andrew Haigh commented:
"The merger presents an opportunity for both our Societies to
come together in a way that truly benefits both sets of members. As
a financially robust, purpose-powered business, the move supports
Newcastle Building Society in delivering our growth strategy at
greater scale and impact, and in a way that offers opportunity for
members, and colleagues from both organisations."
Chairman of Manchester, David Harding commented:
"Manchester's Board strongly believes that this merger is in our
members' best interests. Our members will become part of a larger,
financially robust Society that can offer a range of products and
services we are unable to match as a standalone entity whilst
providing staff at Manchester with long-term opportunities within
the Newcastle Building Society and Group."
Since 2013, the Manchester Board has been de-risking and
shrinking Manchester's balance sheet with no new mortgage lending
being undertaken. While Manchester's current capital and liquidity
position is regulatory-compliant, the Manchester Board believes
Manchester lacks the scale and resilience to endure a major
financial or economic stress without raising additional capital.
The Manchester Board's current projection is that the Society
would, as a standalone entity, have recurring losses which will
deplete capital reserves each year. Accordingly, the Manchester
Board has considered a range of strategic options and concluded
that the best interests of members would be served by a merger with
a larger, stronger building society.
Recognising these risks and the financial uncertainties facing
Manchester, the Manchester Board requested that the PRA exercises
its power under section 42B(3)(b) of the Building Societies Act
1986 (the 'Act'). This allows the PRA to direct that, instead of
resolving to transfer its engagements by the member resolutions
normally required, the transferring society can proceed via Board
resolution, if certain conditions are met. These include that -
having consulted the FCA - the PRA considers it expedient to give
the direction in order to protect the investments of shareholders
or depositors. The PRA has approved the request by the Manchester
Board to direct that the transfer of its engagements to Newcastle
can proceed by a Board resolution, which means that a vote by
members of Manchester will not be required.
The Newcastle Board also requested that the PRA consents to
Newcastle proceeding with the merger by way of a Board resolution,
under section 94(5)(b) of the Act. The PRA has consented to this,
which means that a vote by members of Newcastle will not be
required.
It is expected that all eligible members of Manchester will be
sent a Merger Notification Statement with further details of the
merger around the end of March 2023.
Interested parties (which includes the members of both
Manchester and Newcastle) will also have the opportunity to make
representations, before the PRA decides whether or not to confirm
the merger. Details of the process for this will be advertised in
due course in accordance with the requirements of the Act.
The merger will not involve a distribution to the members of
either Society.
Manchester Permanent Interest Bearing Shares ('PIBS') will
become PIBS with Newcastle on the merger taking effect with their
existing terms and conditions, but subject to Newcastle's
Rules.
If the merger does not proceed as planned, the heads of terms
contain provisions which, depending on the circumstances, may
require one of the Societies to pay the other's external costs of
up to GBP1 million.
This merger is an important step in maintaining a strong
building society sector in the UK, with Newcastle's financial
strength providing a solid foundation for the future.
The merger will be conducted in accordance with the process set
out in the Act. It is subject to the execution of a legally-binding
instrument by each society, the boards of both Societies passing a
resolution to proceed with the merger, and the PRA confirming the
merger.
If the PRA decides to confirm the merger, it is expected that
the merger will become effective on 1(st) July 2023. The Newcastle
Board looks forward to welcoming the members of Manchester as full
members of Newcastle if the merger takes place.
- Ends -
This announcement contains inside information for the purposes
of article 7 of the market abuse regulation (596/2014/EU) as the
same has been retained in UK law as amended by the market abuse
(amendment) (EU exit) regulations (SI 2019/310) (UK MAR).
The person responsible for arranging for the release of this
announcement on behalf of Manchester Building Society is Mark
Winterbottom (Finance Director) and on behalf of Newcastle Building
Society is David Samper (Chief Financial Officer).
Further information on the powers contained in sections
42B(3)(b) and 94(5)(b) is available in the PRA's Supervisory
Statement 19/15 exercising certain functions under the Building
Societies Act 1986.
Newcastle Building Society has c345,000 members and 31 branches.
It employs c1400 people and at 31(st) December 2022 its total
assets were cGBP5.3bn (subject to audit) making it the 8th largest
Building Society in the UK
Manchester Building Society has c11,000 members and no branches.
It employs 44 people and at 31 December 2022 its total assets were
cGBP0.2bn (subject to audit) making it the 41st largest Building
Society in the UK
Addleshaw Goddard LLP has acted as legal adviser to Manchester
and TLT LLP has acted as legal adviser to Newcastle
For more information contact
Newcastle
Kathryn McLaughlin,
Newcastle Building Society
+44 (0) 7575 474741
Headland Consultancy (Financial PR)
+44 (0) 20 38054822
Andy Rivett-Carnac
+44 (0) 7968 997 365
Manchester
Sam Cartwright - H/Advisors Maitland
020 7379 5151
scartwright@maitland.co.uk
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END
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