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Co-op group look set to lose control of Co-op bank

22/10/2013

The Co-op group have confirmed that they are in talks to sell off a majority stake of the banking arm of the mutual organisation, due to the bank facing a shortfall of £1.5 billion.

The mutual organisation will still hold a 30% share in the bank, and retain ‘effective’ control, while it still holds the single largest stake. However, this ‘effective’ control is not guaranteed for the long-term future, and any major investments could potentially see the Co-op group losing control of the bank.

The potential of Co-op losing control of the company has raised some concerns that their ‘principles and ethos’ of fair and ethical trading may be lost in-lieu to profit driven investors. Originally, the Co-op group planned to avoid these possibilities by attempting to retain a majority stake of 70% in the bank, which would have seen the Co-op group investing £1 billion of it’s own assets towards plugging the £1.5 billion deficit, whilst the remaining £500 million would have been sourced through bond holders and preference shares. However, this deal was rejected by the banks creditors, which was led by a US hedge fund.

Co-op chief executive, Euan Sutherland earlier said that a deal had been struck in principle to sell 70% of the bank, but that the bank would retain its key principles. He said: "This bank will remain the Co-operative Bank," and that “we are embedding the co-operative principles in the constitution of the bank to guarantee this."

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