LBS.L Regulatory News (LBS)

19 Jan 2006 09:27

Leeds Building Society19 January 2006 19th January 2006 For Immediate Release Leeds and Mercantile Building Societies Announce Merger The Directors of Leeds and Mercantile Building Societies today announced thatthey have agreed a merger, which is expected to be effective on 1 August 2006,subject to approval by the Mercantile members and confirmation by the FinancialServices Authority (FSA). Mercantile members will be invited to vote on theproposal at the Society's AGM at the end of April. The FSA has consented toLeeds Building Society proceeding by Board resolution. The combined Society, which will be named Leeds Building Society, will haveassets of almost £7bn, with £6.7bn from Leeds Building Society and £0.24bn fromMercantile Building Society. The new society will have around 635,000 members, 69 branches throughout the UKand around 1,000 employees. Mercantile's 30,000 qualifying savers and 4,000 qualifying borrowers areexpected to receive a bonus of at least £100 if the merger goes ahead. Gordon Robinson, chief executive of the Mercantile Building Society, said: "Thisrepresents excellent news for our members and an exciting opportunity for bothsocieties. Mercantile has been and continues to be a very successful society andis in a strong position. The board has used that position of strength to findthe optimal way forward for the members in a rapidly changing financial servicessector. Taking into account this maturing marketplace, with its regulatory requirements,demands for ever more sophisticated IT and greater competition, we decided thatthe long-term interests of our members would be best served by seeking a partnerwho can bring the benefits of greater size but still retain for our members allthe advantages and privileges of mutuality. With the Leeds we have achieved those objectives. As well as remaining membersof a mutual building society our members will see significant new benefits,gaining access to a wider range of competitive products and services than wouldbe possible without this merger. They will gain access to a national branchnetwork, excellent call centre operations, cheque book accounts and web-basedfunctionality for both savings and mortgages. The merger will also result in ourmembers becoming part of a society with substantially greater total assets. The interests of staff have also been at the forefront of our minds and thisdeal gives them job security along with greater training and careeropportunities. As an Investor in People, Leeds Building Society recognises theskills of our employees and the loyalty of our members and has made a commitmentto grow the business in the region enabling our staff to continue to developtheir careers in the enlarged society.'' Mercantile Building Society's Wallsend head office will be retained as anoperational administrative centre and the new society is guaranteeing noredundancies as a result of the merger for at least three years. Existing staffpension arrangements will be preserved.Leeds Building Society is committed to the ongoing success of Mercantilebranches and proposes to carry out a programme of further investment throughrefurbishment, new technology and local advertising. The operations of both societies are geographically complementary which willsignificantly improve the distribution of both products and services to membersof the enlarged society. Ian Ward, chief executive of the Leeds Building Society said: "This is greatnews for customers of both societies. Members of Leeds Building Society will seetheir society grow and increase its branches in the North-East, and Mercantilemembers will benefit from a wider range of products and the real efficienciesthat will be realised by the combined societies The enlarged society will give us the opportunity to build further on our growthcapabilities whilst maintaining the competitive advantages of cost efficiency, astrong capital base and good asset quality. Leeds Building Society hasconsistently demonstrated its efficiency with its cost income ratio of 47p in2004 being the most favourable of any building society." Leeds Building Society, which already operates on a multi-site basis, withdifferent offices around the UK, will gain additional flexibility fromMercantile Building Society's Wallsend site. There are a range of potentialopportunities under consideration, including the expansion of Mercantile'ssubsidiary Mercantile Asset Management Ltd to originate and trade in mortgageassets. A local board will be created to provide continuity and stability forMercantile's members and staff. It will comprise the existing directors of theMercantile and an executive director of Leeds Building Society. Its mainfunctions will be to monitor Mercantile's member issues and act as an advisor tothe main board. In particular, it will contribute to the development of a strongidentity for the combined business throughout the North-East region. Under the proposed merger, Ian Ward, chief executive of Leeds Building Society,will become chief executive of the combined society. Gordon Robinson, chiefexecutive of Mercantile Building Society, will become director for theNorth-East and will assist with the development of the business and theintegration of the two societies, until his retirement date in August 2007. Thechairman of the Mercantile Building Society John Anderson will join the LeedsBuilding Society board. The combined society will remain an independent mutual building society owned byits members. Details of the bonus expected to be paid to qualifying borrowers and savers ofMercantile Building Society will be announced. Each qualifying member ofMercantile Building Society is expected to receive a taxable minimum mergerbonus payment of £100. It is expected that eligible savers and borrowers of Mercantile Building Societywill receive full particulars of the proposed merger in March together withdetails of the bonus arrangement. Borrowing or saving membership at December 31 2005 is one of the requirementsfor the bonus. Payment of the merger bonus is dependent on approval of thetransfer by Mercantile members at its April AGM and on approval of the merger bythe FSA. ENDS Notes to editors •The combined society will have assets of almost £7bn, with £6.7bn from Leeds Building Society and £0.24bn from Mercantile Building Society. •Leeds Building Society is the UK's 8th largest with 58 branches. Its pre-tax profit in the first six months of 2005 was £24m •Mercantile Building Society is the UK's 42nd largest with 12 branches in the North-East. For further information please contact: Gary BrookPR ManagerTelephone: 0113 225 7606Out of Hours: 07866 455111Email: gbrook@leedsbuildingsociety.co.uk This information is provided by RNS The company news service from the London Stock Exchange