Tens of thousands of members of Mercantile Building Society look set to receive a bonus of at least £100 after it struck a merger deal with Leeds Building Society to form a company with assets of almost £7 billion.
Mercantile’s 30,000 qualifying savers and 4,000 borrowers will receive the bonus provided a vote on the merger is passed at its annual general meeting in April.
The merger will also require the approval of the board of Leeds Building Society and of the Financial Services Authority. Barring any hiccups the merger should be effective by August 1.
The newly combined society, which will be called Leeds Building Society, will have assets of almost £7 billion and about 635,000 members. It will also remain an independent mutual building society owned by its members.
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Gordon Robinson, chief executive of Mercantile, said: “This represents excellent news for our members and an exciting opportunity for both societies.
“We decided that the long-term interests of our members would be best served by seeking a partner who can bring the benefits of greater size but still retain for our members all the advantages and privileges of mutuality.”
Leeds Building Society is the UK’s eighth-largest, with 58 branches and assets of £6.7 billion. Mercantile is the UK’s 42nd-largest building society, with 12 branches in the North East and assets of £0.24 billion.
It is expected that Mercantile’s eligible savers and borrowers will receive notification of the proposed merger in March, along with details of the bonus arrangements. One requirement for the bonus will be that borrowers and savers held membership of the building society on December 31 last year.
As part of the deal, the new society will also be guaranteeing the jobs of existing staff for at least three years, while their pension arrangements will also be unaffected. Mercantile’s head office, based in Wallsend, will be retained as an administrative centre.
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Mr Robinson, chief executive of Mercantile, will become director for the North East and will assist with the development of the business and the integration of the two societies, until his retirement in August next year. John Anderson, the chairman of the Mercantile Building Society, will join the board.
Ian Ward, chief executive of Leeds Building Society, will become chief executive of the combined society.
Mr Ward said: “Members of Leeds Building Society will see their society grow and increase its branches in the North East, and Mercantile members will benefit from a wider range of products and the real efficiencies that will be realised by the combined societies.”
Leeds Building Society made a pre-tax profit of £24 million in the first six months of 2005. The newly merged society will have 69 branches throughout the UK and about 1,000 employees.