Financiers Eye £600m Co-op Insurance Arm
An investment vehicle backed by financiers including the former Conservative Party treasurer, Michael Spencer, is preparing a £600m swoop on the Co-operative Group's general insurance arm.
I understand that Tungsten Corporation, which is headed by Edmund Truell, founder of the private equity group Duke Street Capital, has set its sights on an offer for the unit.
The Co-op, which reports its annual results for 2012 tomorrow, is exploring a sale of the business as it attempts to raise sufficient capital to press ahead with a takeover of 632 Lloyds Banking Group branches.
Earlier this week, the Co-op sold its life insurance and asset management arm to Royal London, another mutual, for £219m.
Tungsten has not yet made a formal approach for the Co-op general insurance business, which has one of the biggest home and motor insurance operations in Britain, with hundreds of thousands of customers.
There is, however, understood to have been an informal expression of interest by the acquisition vehicle, set up last year, in the Co-op arm.
The Co-op is close to appointing bankers to work on the sale of its remaining insurance operations. Deutsche Bank and another firm are in the frame for the role, insiders said on Wednesday.
The mutually-owned organisation is expected to say tomorrow that it remains committed to buying the Lloyds branches, which would transform it into a serious competitor to Britain's established high street banks.
Regulators have, though, expressed concern about the Co-op's capital position, and the branch takeover is unlikely to happen without significant capital gains being generated by asset sales. Mutuals, unlike other companies, cannot raise capital simply by selling shares in themselves.
The Bank of England's Financial Policy Committee met this week to discuss the equity positions of British banks. It is expected to disclose next Wednesday the sum that major banks and building societies need to raise in order to repair their capital holes.
The Co-op and Tungsten both declined to comment.