This will be the biggest ever building society merger; the enlarged Society being the UK's leading mutual organisation with total assets of over £150 billion, and will be named Nationwide Building Society. The merger is expected to become effective by the end of September 2007, subject to approval being given by Portman members, confirmation by the Financial Services Authority (FSA), and approval by the Office of Fair Trading.
The chief executive of Nationwide, Philip Williamson and the chief executive of Portman, Robert Sharpe, will continue in their current roles for the time being. Graham Beale, currently group finance director at Nationwide, will become chief executive of Nationwide on 1 April 2007 and subsequently of the enlarged Society on completion of the proposed merger.
In the view of the Boards of Nationwide and Portman, the proposed merger will deliver significant strategic, operational and financial benefits to the enlarged Society:
Benefits to Members
- The enlarged Society will continue to be a mutual building society: owned by and run for the benefit of its members; offering its members attractively priced products and services; and remaining highly competitive in its chosen markets.
- It will be well placed to generate substantial financial benefits and will build on Nationwide's and Portman's excellent track record for delivering pricing benefits to members.
- The proposed merger will provide members with access to a larger network of branches and agencies and will improve access to products and services. Building on a recent investment of £300 million in Nationwide's branch network, Nationwide, like Portman, remains committed to sustaining a comprehensive branch network, and the enlarged Society will benefit from over 880 locations across the UK.
- Portman members will have access to current account and credit card products, not previously available to them as members of Portman. Nationwide members will have access to a new range of wealth management and financial planning services. The combination of Nationwide and Portman will also create a wider range of specialised mortgage products including self-certificated, buy-to-let and non-conforming mortgages and an improved intermediary mortgage lending operation.
- Qualifying saving and qualifying borrowing members of Portman are expected to receive a minimum merger bonus of £200 (pre-tax), representing a distribution of over 70 per cent of Portman's general reserves at 30 June 2006.
- In addition to the merger bonus, Portman members will benefit from a continued membership interest in the enlarged Society (which will have pro forma reserves of £5.5 billion), from efficiencies of scale and from sharing in the financial benefits arising from the merged group.
Benefits of Scale
- The enlarged Society will have assets in excess of £150 billion. It will benefit from having a leading position in both the mortgage and savings markets and will have over 13 million members. It will be the second largest mortgage lender and the second largest retail savings provider in the UK.
- The efficiencies of scale generated by the proposed merger, and from the integration of Nationwide's and Portman's networks and capabilities, will provide significant opportunities to enhance growth in core markets.
- The enlarged Society will be in a stronger position to play a leading role in growing a modern and healthy mutual sector in the UK and to champion consumer issues. A merger of Nationwide and Portman will create a compelling alternative to the big retail banks.
Benefits to Employees
- The Boards of Nationwide and Portman attach great importance to retaining the skills and experience of their respective management teams and employees. The management teams of Nationwide and Portman will be combined in order to obtain the maximum benefit from their skills and experience.
- The enlarged Society will be in a strong position to attract and retain the industry's best people, and to provide great career opportunities for its employees.
Board and Operational Structure
- Nationwide is pleased to announce that Graham Beale, currently group finance director, has been appointed as the new chief executive to succeed Philip Williamson. He will take over responsibility for Nationwide on 1 April 2007 and subsequently for the enlarged Society on completion of the proposed merger. Robert Sharpe will retire from his position as chief executive of Portman on the date of the proposed merger.
- It is anticipated that the Board of the enlarged Society will consist of 14 directors - six executive directors and eight non-executive directors, providing a strong and experienced team with extensive skills and expertise in managing highly successful mutual businesses.
- As already announced, the current chairman of Nationwide, Jonathan Agnew, will retire in July 2007 at the end of his five year term. He will be succeeded by Geoffrey Howe, currently deputy chairman of Nationwide. Bill Tudor John, currently chairman of Portman, will become a deputy chairman of the enlarged Society. Including the chairman of Portman, five members of the Portman Board will join the Board of the enlarged Society.
- Nationwide's existing head office in Swindon will be the head office of the enlarged Society. Its major administrative centre in Northampton will continue in its present role.
- Portman's current head office, based in Bournemouth, will be a key business centre within the enlarged Society and will remain a significant employer in that region. The enlarged Society will consider, in due course, the locations of other offices to ensure it is best placed to serve the needs of all its customers.
- It is intended that the majority of Portman's branches will be incorporated into the network of the enlarged Society and rebranded Nationwide. Clear overlaps between the two networks will be assessed over the coming months.
Process and Timetable
- Eligible savers and eligible borrowers of Portman will receive a merger booklet in early 2007, including further details of the proposed merger, together with notice of the Portman AGM which will take place in Spring 2007. Eligible savers and eligible borrowers of Portman will be asked to vote on the proposal to merge at the Portman AGM. The Board of Portman will recommend that its members vote in favour of the merger resolutions to be proposed at the Portman AGM.
- The FSA has given consent to Nationwide approving the merger by Board resolution.
Philip Williamson, chief executive at Nationwide, said: "This is great news for members of both societies. As a result of the merger, 13 million people will be members of a bigger and even better society, offering market leading products and pricing, underpinned by a strong commitment to mutuality. We are really looking forward to welcoming customers and employees of Portman to the world's number one building society, which will be the second largest mortgage lender in the UK and will reinforce Nationwide's present position as the second largest provider of retail savings. Together, I know we will be in an even stronger position to provide our members with better product pricing and to continue to be the first choice for millions of consumers."
Robert Sharpe, chief executive of Portman, said: "This important decision to merge two of the largest and most successful UK building societies will create an organisation of formidable strength and size. If building societies are to continue to compete successfully with the retail banks, they need to enjoy comparable economies of scale. This is a great deal for Portman members. They will receive a significant merger bonus, will enjoy an ongoing interest in the enlarged Society and will benefit from improved access to a broader range of highly competitive products and services."
