OneSavings Plans Charter Court Deal to Help Lure U.K. Borrowers

(Bloomberg) -- OneSavings Bank Plc is in advanced talks to acquire Charter Court Financial Services Plc in a deal valuing the combined business at about 1.8 billion pounds ($2.3 billion), making them the latest lenders to scale up to compete for U.K. consumers.

The proposed transaction, which comes five months after rivals Virgin Money and CYBG Plc completed their merger, would give 55 percent of the enlarged firm to OneSavings investors, the companies said in a statement on Monday.

OneSavings Chief Executive Officer Andy Golding would become CEO of the combined group under the proposal, the companies said. The aim of the tie-up is to create a U.K. mortgage-lending specialist with greater scale and resources, they said.

OneSavings Bank rose 10.7 percent to 409.6 pence at 9.06 am in London trading, the highest since October and the biggest rise since August 2016. Charter Court rose 10.4 percent to 338.2 pence, its biggest increase since floating in 2017.

“Subject to the successful outcome of ongoing discussions, the boards of OSB and Charter Court expect to recommend the possible combination to their respective shareholders,” the companies said in the statement.

Competitive Market

“The deal would appear to be a genuine merger of near equals,” said Edward Firth, an analyst at Keefe, Bruyette & Woods. “The current competitive retail funding environment together with securitisation market challenges” make a combination into a larger group with cost synergies and access to retail funding attractive for Charter Court, he added.

So-called challenger banks were established to take on Britain’s high street lenders in the wake of the financial crisis, but tight margins, uncertainty over Brexit and new regulation are posing challenges to profitability and several have turned to consolidation.

CYBG completed its deal to buy Virgin Money Holdings U.K. Plc for about 1.7 billion pounds in October. This followed South Africa’s FirstRand Ltd.’s 1.1 billion-pound takeover of Aldermore Group Plc in early 2018.

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