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UK challenger banks OneSavings, Charter Court to merge

U.K.-based OneSavings Bank PLC and Charter Court Financial Services Group PLC agreed to an all-share merger that would create a combined entity with approximately £15.6 billion of net customer loans and £13.2 billion of customer deposits.

OneSavings would take over Charter Court, the shareholders of which will receive 0.8253 new OneSavings share for every Charter Court share they hold. Charter Court's shareholders will own about 45% of the combined entity and will be entitled to receive permitted dividends without affecting the consideration.

The companies intend to keep and operate their lending brands, as well as their retail savings brands.

Malcolm Williamson, currently Charter Court chairman, will hold the same post in the combined entity, which will reportedly have market capitalization of roughly £1.6 billion. OneSavings CEO Andy Golding and CFO April Talintyre will also retain their posts in the combined group.

OneSavings Chairman David Weymouth, meanwhile, will become deputy chairman of the enlarged entity, while Charter Court CEO Ian Lonergan will serve as integration director for up to 18 months to facilitate the combination and deliver its expected benefits. Charter Court CFO Sebastien Maloney and Charter Court Deputy Chairman Philip Jenks will become advisers for a maximum of 12 months.

Peter Elcock, Charter Court's chief risk officer, will take on the group risk role while Hasan Kazmi will remain chief risk officer of the existing OneSavings business.

The challenger banks also said they could subject employees to some operational and administrative restructuring that could lead to job cuts of about 14% of their current combined workforce of 1,684 employees.

The merger is expected to take effect in the third quarter, subject to certain conditions.

Inaugural dividends

Additionally, Charter Court's shareholders will still receive inaugural dividends of 12.7 pence per share for full year 2018, including a final dividend of 9.9 pence per share, while OneSavings' shareholders would still get a dividend of 14.6 pence per share for full year 2018, up from 12.8 pence per year for 2017.

Charter Court will pay the dividend to shareholders May 22, pending approval at its May 15 annual general meeting, while OneSavings will pay the dividend May 15 if approved at its May 9 annual general meeting.

OneSavings reported a preliminary statutory profit before tax of £183.8 million for full year 2018, up from £167.7 million in 2017, while Charter Court posted full-year 2018 pretax profit of £158.2 million, up from £111.7 million a year earlier.

RBC Capital Markets and Credit Suisse served as joint financial advisers to Charter Court on the deal, with RBC Capital Markets also acting as corporate broker. Citigate Dewe Rogerson serves as financial PR adviser to Charter Court.

Meanwhile, Rothschild & Co. serves as financial adviser and sponsor to OneSavings, with Barclays serving as financial adviser and corporate broker. Brunswick acted as financial PR adviser to OneSavings.