Kent Reliance confirms Flowers deal

12th Jul 2010 08:05

Building society Kent Reliance has confirmed talks are underway with US private equity firm JC Flowers, which intends to use it to create a new force in UK high street banking.Flowers will invest £50m for a 49% stake in a new holding company. Under the deal, the building society will remain a mutual, with Kent Reliance members owning 51% of the new structure."If the new structure proceeds, it would allow for substantial new capital investment to support the business and would provide a means for the Society's members to remain members of a mutual organisation," it said.Flowers made an unsuccessful attempt to buy Northern Rock in 2007 but has now added its name to the growing list of companies trying to break into the UK retail banking market.Once the new structure is in place, Flower is expected to hoover up possibly as many as ten more building societies to create a major high street lender.The new vehicle may even join the battle for the parts of Lloyds Banking Group, Royal Bank of Scotland and Northern Rock that have been put up for sale to meet European Union state aid rules.But competition for these will be fierce. Lord Levene and Sir David Walker unveiled a new bank to buy some of these state-controlled bank assets last week. It will list on AIM by the end of the month.It has been reported that billions of pounds have already been committed in principle to the project by institutional shareholders including Aviva Investors, F&C Asset Management and Invesco. Virgin Money also has a bank licence after buying Church House Trust in Somerset this year, while Santander has put in a bid for the 318 branches Royal Bank of Scotland has put up for sale.Northern Rock is expected to be privatised next year. RBS has been ordered to sell off 300 branches by European Commission's competition authorities, while Lloyds has to sell 600 branches.