Newcastle and Manchester Building Societies to bypass member vote over merger
The Prudential Regulation Authority has allowed the pair to forgo a member vote to speed up the deal, in light of Manchester’s balance sheet woes.
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Your support makes all the difference.Newcastle Building Society and under-pressure smaller rival Manchester Building Society have been given approval by the industry watchdog to bypass a member vote over their plans to merge.
Newcastle – the UK’s eighth biggest building society – and Manchester have now agreed the terms of a deal after entering into exclusive talks last August over a tie-up.
But the pair said they had put in a formal request with the Prudential Regulation Authority (PRA) to forgo a member vote in order to speed up the deal, given the “risks and the financial uncertainties facing Manchester”.
The PRA has since granted the request, allowing the two mutuals to join forces by way of a board resolution, without the need to put it before their members “in order to protect the investments of shareholders or depositors”, according to the lenders.
Manchester's board strongly believes that this merger is in our members' best interests
It comes as Manchester is facing strain on its balance sheet, despite having taken action to lower its risks, such as stopping new mortgage lending in 2013.
The pair said that “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.”
Newcastle Building Society has around 345,000 members and 31 branches. It employs about 1,400 staff.
Manchester Building Society has no branches and around 11,000 members, while it employs 44 people.
Chairman of Manchester, David Harding, said: “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.”
Newcastle chief executive Andrew Haigh added: “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.”
They are planning to complete the merger on July 1, subject to formal approval by the PRA.