Nationwide: Press release on Dunfermline acquisition

Dunfermline, the largest uilding society in Scotland was forced into the hands of the Nationwide.  This happened only after the U.K. government was forced to pony up 1.6 billion pounds – not the best of news for Gordon Brown before a major world summit.

As the Times Online says:

The state-backed rescue brings to six the number of UK deposit takers saved with direct taxpayer cash. The others are the Northern Rock, Bradford & Bingley, Royal Bank of Scotland and HBOS and Lloyds TSB, now merged into Lloyds Banking Group

Below is the Nationwide’s press release on the event:

ACQUISITION OF DUNFERMLINE BY NATIONWIDE BUILDING SOCIETY

Following the announcement by the Bank of England (30 March 2009), in relation to Dunfermline, Nationwide can confirm that it has taken ownership of Dunfermline’s:

• £2,353 million of retail deposits, representing the accounts of c.300,000 Dunfermline members;
• Dunfermline’s 34 branches and retail sites, and all related employees, plus Dunfermline’s head office at Dunfermline;
• Dunfermline’s £1,022 million prime mortgage lending book;

 These assets were transferred to Nationwide under a statutory instrument made under the provisions of the Banking Act 2009.

The acquisition of Dunfermline’s savings accounts and prime lending book further strengthens Nationwide’s retail customer base and franchise. The business acquired will continue to trade as Dunfermline Building Society and will complement the other regional brands operating in Nationwide’s group namely Cheshire Building Society and Derbyshire Building Society. This acquisition allows Nationwide to operate at a national and local level and recognises the goodwill attached to regional building societies.

Commenting on the transaction, Graham Beale, chief executive of Nationwide, said: “This is good news for the members of Dunfermline who are now joining the world’s largest building society. As members of a solid, stable and dependable organisation, members of Dunfermline can be assured that their savings are safe. Nationwide has a strong association with Scotland and has been providing service to customers in this key market for many years. This transaction will enhance Nationwide’s ability to operate nationally and locally, whilst recognising the goodwill attached to a historic and important Scottish brand.

“Nationwide is in a unique position by virtue of its size and financial strength, to provide support to Dunfermline, and we regard it as both responsible and commercially beneficial to undertake this transaction. This transaction excludes high risk assets: commercial loans and some residential loans (including the acquired and equity release portfolios) were not transferred, and the transaction will enhance the overall value to Nationwide’s membership over the medium term.”

The Dunfermline brand will remain and Dunfermline’s customers will continue to use their existing channels – branches, telephone and post – for transactions, as usual. They will see minimal change or disruption.

The combined business of Nationwide and Dunfermline will have around 900 branches with a good geographical spread across the UK. In addition, it is also expected that upon completion of the transfer, Nationwide’s market share of retail deposits will increase to around 11% and the combined business will have a member base of 15 million.

Background to the transactions

Nationwide: Nationwide has satisfied itself that the proposed transaction is in the long term interests of its members and will generate value over the medium term. The Board regards it as responsible and commercially beneficial to support the mutual sector in this way and to extend the franchise of Nationwide that already includes two regionally branded building societies.

Financial Impact

Nationwide has a strong and high quality balance sheet with total assets of around £200 billion, and total capital of £9.7 billion as at 30 September 2008.

Members

The combined Society will continue to operate as a mutual building society, owned by and run for the benefit of its members. Nationwide has a membership of nearly 15 million, Dunfermline has a membership of 0.3 million.

As part of the enlarged organisation, Dunfermline members will benefit from the security provided by Nationwide’s scale and financial strength. The Dunfermline brand and branch network will continue.

Nationwide has a long-standing track record of value creation for its membership, and estimates that members benefited by £350 million in the first half of the current financial year (08/09) as a result of better pricing, lower interest rates and lower charges.

Transaction structure

The transaction will take place under the so-called “special resolution regime” contained in the recently introduced Banking Act 2009. This legislation grants the UK Tripartite authorities – the Treasury, the Bank of England and the FSA – special powers to deal with financial institutions that are in difficulties, including making statutory instruments to transfer some or all of the business of the institution in financial difficulty to a third party. The proposed transaction will take place by way of the Bank of England making such an order under the Banking Act 2009. This order will transfer certain of the assets and liabilities of Dunfermline to Nationwide, as well as certain other assets and liabilities to a wholly-owned subsidiary of the Bank of England.

The terms of the transfer were negotiated between the Nationwide Board, Bank of England and the Treasury.

Board and operational structure

On completion of the merger, the combined Society will be run by the current Nationwide Board, led by chairman, Geoffrey Howe, and chief executive, Graham Beale. The board of Dunfermline will resign concurrent with the transfer of the business to Nationwide.

Dunfermline will sit alongside the Derbyshire and Cheshire building societies as part of Nationwide’s regional franchise and will report through to Nationwide’s Group Development Director, Tony Prestedge. Nationwide’s existing head office in Swindon will remain the head office for the combined Society.

The business of Dunfermline will continue on the effective date to operate under its current brand as a separate trading franchise of Nationwide. There are no immediate plans to integrate Dunfermline’s member business with Nationwide’s member business and the branch network will remain. However, it is likely that some back office and central group functions of Dunfermline will no longer be required.

Timetable

Under a statutory instrument made under the Banking Act 2009, the transfer of the relevant assets and liabilities of Dunfermline to Nationwide will be effective from 8am on 30 March 2009.

Morgan Stanley & Co Limited is acting as financial adviser to Nationwide and no one else in connection with the matters described in this announcement. In connection with such matters, Morgan Stanley & Co Limited, its affiliates and their directors, officers, employees and agents will not regard any other person as their client nor will they be responsible to any other person for providing the protections afforded to their clients.

Allen & Overy LLP has acted as legal adviser to Nationwide.

Source
Nationwide Media Centre
Nationwide’s Dunfermline rescue costs taxpayers £1.6bn – Times Online