JC Flowers in mutual deal
PRIVATE equity firm JC Flowers is in advanced talks with building society Kent Reliance to create a joint venture which could pave the way for a new “mini super-mutual”, transforming the fortunes of the ailing sector.
If the deal goes ahead, Kent Reliance will transfer all of its assets and liabilities over to the newly-created banking entity, in which it will hold a majority 51 per cent stake. JC Flowers will inject £50m of new capital into the venture, in return for the remaining 49 per cent of the equity.
The firms have lured former Financial Services Authority chairman Sir Callum McCarthy to join the board of the combined venture, though he is currently thought to be unlikely to adopt the chairmanship. Kent’s management team, led by chief executive Mike Lazenby, will remain in place.
An agreement would prove a lifeline for Kent Reliance, which has struggled to meet regulatory recapitalisation demands in the wake of the credit crisis, along with other building societies.
Sources close to the deal also said that the venture could prove a catalyst for a spate of similar agreements in the sector. JC Flowers, which was set up by former Goldman Sachs banker J. Christopher Flowers in 2001, is ready to stump up hundreds of millions of pounds of additional capital in order to use the new banking venture as a focal point for further consolidation in the mutual sector.
The venture will have to be approved by Kent’s members before it is launched, with a vote anticipated before the end of the year.
A stock exchange announcement containing details of the deal is expected before the week is out.