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The Co-operative Bank has made an audacious approach about a merger with TSB in a move that could trigger a fresh wave of consolidation among Britain’s mid-sized lenders.

Sky News has learnt that the Co-operative Bank contacted TSB’s Spanish owner, Banco Sabadell, earlier this month to gauge its appetite for a deal.

A TSB bank
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TSB’s Spanish owner has been approached about a sale of the UK lender.

It is understood to have said that it would be willing to pay in excess of £1bn for TSB.

City sources said this weekend that Sabadell had indicated that it was not keen to enter into formal discussions at this stage about a merger of what by some measures are the UK’s seventh-largest and eight-largest banks.

If it did materialise, a tie-up between two of the best-known brands in the sector would create a high street lender with more than 8m customers encompassing mortgages, current accounts, credit cards and savings products.

That would make the combined business larger by customer numbers than Virgin Money, which has approximately 6.5m customers, although it would be smaller than Virgin Money as measured by the size of its loan-book.

It would also remain far smaller than Lloyds Banking Group, NatWest Group, Barclays, HSBC Holdings and Santander UK in terms of market share and high street presence.

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Nevertheless, the Co-operative Bank’s approach for TSB was described this weekend by one industry executive not connected to the prospective deal as a logical move.

The profitability of UK retail banks has been hampered since the aftermath of the 2008 financial crisis, with interest rates at historic lows for more than a decade.

Analysts have for years forecast a wave of corporate activity that would see mid-sized banks bulk up, although the combination of OneSavings Bank with Charter Court Financial Services and Virgin Money’s tie-up with CYBG have proved to be exceptions.

This week, a takeover of Sainsbury’s Bank by Centerbridge Partners, the US-based investor, fell apart after the supermarket group concluded that it would not deliver value to shareholders.

If the Co-operative Bank did succeed with a formal bid for TSB, it would be a deal laden with corporate irony.

In 2013, the Co-operative Bank’s bid to acquire the branch network which became TSB was left in ruins when the scale of its own financial crisis emerged.

The Co-operative Bank, which at the time was majority-owned by the Co-op Group, one of the UK’s biggest mutuals, was forced to turn to a group of American hedge funds in a £1.5bn rescue deal.

Its former chairman, Paul Flowers, was left humiliated by tabloid revelations about his private life that led to him being dubbed ‘the crystal methodist’, and prompted an overhaul of its leadership and ownership structure.

The ensuing eight years brought further turbulence for both the Co-operative Bank and TSB, however, with the former reliant on another bailout by investors in 2017.

TSB, meanwhile, was plunged into a storm of its own the following year when an IT systems calamity left millions of customers locked out of their accounts for days.

The incident came three years after Sabadell bought TSB from public investors and Lloyds Banking Group, its former parent.

TSB’s future has been the subject of intense speculation since last year when its Spanish owner signalled that it would be open to a sale.

The odds on a short-term deal diminished in the spring, however, when Sabadell indicated that it would delay an auction process.

News of the Co-operative Bank’s unsolicited approach to Sabadell is likely to trigger interest from other suitors for TSB, which operates nearly 300 branches.

It comes just weeks after TSB confirmed the appointment of Nick Prettejohn, a City veteran, as its new chairman.

The Co-operative Bank’s ability to propose a transaction of this scale underlines its recent recovery, having announced an underlying profit of nearly £13m for the first half of 2021.

It has itself been on the receiving end of takeover interest, although talks about a sale to Cerberus Capital Management, an often controversial investor, broke down last December.

A merger with TSB would almost certainly make a medium-term exit for both Sabadell and the Co-operative Bank’s owners easier to execute, potentially through a public share sale.

In April, two major investors – Bain Capital Credit and JC Flowers – took a 10% stake in the Co-operative Bank, which some analysts interpreted as a sign that it would become more proactive in its approach to industry consolidation.

The lender’s other shareholders include GoldenTree Asset Management and Silver Point Capital, two US-based hedge funds.

Credit Suisse is advising the Co-operative Bank, while Goldman Sachs has been retained by Sabadell to advise on the future of TSB.

A Sabadell spokesman said: “This is not a transaction that we wish to explore at this moment, as we have previously expressed publicly.”

The Co-operative Bank and TSB declined to comment.

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Octopus Energy sparks £10bn demerger of tech arm Kraken

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Octopus Energy sparks £10bn demerger of tech arm Kraken

Octopus Energy Group, Britain’s largest residential gas and electricity supplier, is plotting a £10bn demerger of its technology arm that would reinforce its status as one of the country’s most valuable private companies.

Sky News can exclusively reveal that Octopus Energy is close to hiring investment bankers to help formally separate Kraken Technologies from the rest of the group.

The demerger, which would be expected to take place in the next 12 months, would see Octopus Energy’s existing investors given shares in the newly independent Kraken business.

A minority stake in Kraken of up to 20% is expected to be sold to external shareholders in order to help validate the technology platform’s valuation, according to insiders.

One banking source said that Kraken could be valued at as much as $14bn (£10.25bn) in a forthcoming demerger.

Citi, Goldman Sachs, JP Morgan and Morgan Stanley are among the investment banks invited to pitch for the demerger mandate in recent weeks.

A deal will augment Octopus Energy chief executive Greg Jackson’s paper fortune, and underline his success at building a globally significant British-based company over the last decade.

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Octopus Energy now has 7.5m retail customers in Britain, following its 2022 rescue of the collapsed energy supplier Bulb, and the subsequent acquisition of Shell’s home energy business.

In January, it announced that it had become the country’s biggest supplier – surpassing Centrica-owned British Gas – with a 24% market share.

It also has a further 2.5m customers outside the UK.

Octopus energy wind turbine. Pic suppled by Octopus.
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Kraken is an operating system licensed to other energy providers, water companies and telecoms suppliers. Pic: Octopus

Sources said a £10bn valuation of Kraken would now imply that the whole group, including the retail supply business, was worth in the region of £15bn or more.

That would be double its valuation of just over a year ago, when the company announced that it had secured new backing from funds Galvanize Climate Solutions and Lightrock.

Shortly before that, former US vice president Al Gore’s firm, Generation Investment Management, and the Canada Pension Plan Investment Board increased their stakes in Octopus Energy in a transaction valuing the company at $9bn (£7.2bn).

Kraken is an operating system which is licensed to other energy providers, water companies and telecoms suppliers.

It connects all parts of the energy system, including customer billing and the flexible management of renewable generation and energy devices such as heat pumps and electric vehicle batteries.

The business also unlocks smart grids which enable people to use more renewable energy when there is an abundant supply of it.

In the UK, its platform is licensed to Octopus Energy’s rivals EON and EDF Energy, as well as the water company Severn Trent and broadband provider Cuckoo.

Overseas, Kraken serves Origin Energy in Australia, Japan’s Tokyo Gas and Plentitude in countries including France and Greece.

Its biggest coup came recently, when it struck a deal with National Grid in the US to serve 6.5m customers in New York and Massachusetts.

Sources said other major licensing agreements in the US were expected to be struck in the coming months.

Kraken, which is chaired by Gavin Patterson, the former BT Group chief executive, is now contracted to more than 70m customer accounts globally – putting it easily on track to hit a target of 100m by 2027.

Earlier this year, Mr Jackson said that target now risked being seen as “embarrassingly unambitious”.

Last July, Kraken recruited Amir Orad, a former boss of NICE Actimize, a US-listed provider of enterprise software to global banks and Fortune 500 companies, as its first chief executive.

A demerger of Kraken will trigger speculation about an eventual public market listing of the business.

Its growth in the US, and the relative public market valuations of technology companies in New York and London, may put the UK at a disadvantage when Kraken eventually considers where to list.

One key advantage of demerging Kraken from the rest of Octopus Energy Group would be to remove the perception of a conflict of interest among potential customers of the technology platform.

A source said the unified corporate ownership of both businesses had acted as a deterrent to some energy suppliers.

Kraken has also diversified beyond the energy sector, and earlier this year joined a consortium which was exploring a takeover bid for stricken Thames Water.

This weekend, Octopus Energy declined to comment.

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Ryanair urges EU chief to ‘quit’ over air traffic strike disruption

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Ryanair urges EU chief to 'quit' over air traffic strike disruption

The boss of Ryanair has told Sky News the president of the European Commission should “quit” if she can’t stop disruption caused by repeated French air traffic control strikes.

Michael O’Leary, the group chief executive of Europe’s largest airline by passenger numbers, said in an interview with Business Live that Ursula von der Leyen had failed to get to grips, at an EU level, with interruption to overflights following several recent disputes in France.

The latest action began on Thursday and is due to conclude later today, forcing thousands of flights to be delayed and cancelled through French airspace closures.

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Mr O’Leary told presenter Darren McCaffrey that French domestic flights were given priority during ATC strikes and other nations, including Italy and Greece, had solved the problem through minimum service legislation.

He claimed that the vast majority of flights, cancelled over two days of action that began on Thursday, would have been able to operate under similar rules.

Mr O’Leary said of the EU’s role: “We continue to call on Ursula von der Leyen – why are you not protecting these overflights, why is the single market for air travel being disrupted by a tiny number of French air traffic controllers?

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File photo dated 02/09/22 of a Ryanair Boeing 737-8AS passenger airliner comes in to land at Stansted Airport in Essex. Ryanair has revealed around 63,000 of its passengers saw their flights cancelled during last week's air traffic control failure which caused widespread disruption across the industry and left thousands of passengers stranded overseas. In its August traffic update, the Irish carrier said more than 350 of its flights were cancelled on August 28 and 29 due to the air traffic contr
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Ryanair has cancelled more than 400 flights over two days due to the action in France. File pic: PA

“All we get is a shrug of their shoulders and ‘there’s nothing we can do’. We point out, there is.”

He added: “We are calling on Ursula von der Leyen, who preaches about competitiveness and reforming Europe, if you’re not willing to protect or fix overflights then quit and let somebody more effective do the job.”

The strike is estimated, by the Airlines for Europe lobby group to have led to at least 1,500 cancelled flights, leaving 300,000 travellers unable to make their journeys.

Ryanair chief executive Michael O'Leary speaks to journalists during a press conference at The Alex Hotel in Dublin. Picture date: Thursday October 3, 2024.
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Michael O’Leary believes the EU can take action on competition grounds. Pic: PA

Ryanair itself had axed more than 400 flights so far, Mr O’Leary said. Rival easyJet said on Thursday that it had cancelled 274 services over the two days.

The beginning of July marks the start of the European summer holiday season.

The French civil aviation agency DGAC had already told airlines to cancel 40% of flights covering the three main Paris airports on Friday ahead of the walkout – a dispute over staffing levels and equipment quality.

Mr O’Leary described those safety issues as “nonsense” and said twhile the controllers had a right to strike, they did not have the right to close the sky.

DGAC has warned of delays and further severe disruption heading into the weekend.

Many planes and crews will be out of position.

Mr O’Leary is not alone in expressing his frustration.

The French transport minister Philippe Tabarot has denounced the action and the reasons for it.

“The idea is to disturb as many people as possible,” he said in an interview with CNews.

Passengers are being advised that if your flight is cancelled, the airline must either give you a refund or book you on an alternative flight.

If you have booked a return flight and the outbound leg is cancelled, you can claim the full cost of the return ticket back from your airline.

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CBI kicks off search for successor to ‘saviour’ Soames

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CBI kicks off search for successor to 'saviour' Soames

The CBI has begun a search for a successor to Rupert Soames, its chairman, as it continues its recovery from the crisis which brought it to the brink of collapse in 2023.

Sky News has learnt that the business lobbying group’s nominations committee has engaged headhunters to assist with a hunt for its next corporate figurehead.

Mr Soames, the grandson of Sir Winston Churchill, was recruited by the CBI in late 2023 with the organisation lurching towards insolvency after an exodus of members.

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The group’s handling of a sexual misconduct scandal saw it forced to secure emergency funding from a group of banks, even as it was frozen out of meetings with government ministers.

One prominent CBI member described Mr Soames on Thursday as the group’s “saviour”.

“Without his ability to bring members back, the organisation wouldn’t exist today,” they claimed.

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Rupert Soames
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Rupert Soames. Pic: Reuters

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Mr Soames and Rain Newton-Smith, the CBI chief executive, have partly restored its influence in Whitehall, although many doubt that it will ever be able to credibly reclaim its former status as ‘the voice of British business’.

Its next chair, who is also likely to be drawn from a leading listed company boardroom, will take over from Mr Soames early next year.

Egon Zehnder International is handling the search for the CBI.

“The CBI chair’s term typically runs for two years and Rupert Soames will end his term in early 2026,” a CBI spokesperson said.

“In line with good governance, we have begun the search for a successor to ensure continuity and a smooth transition.”

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