Savers miss £650 windfalls after Cheshire spurns Portman bid

Cheshire Building Society has turned down a take-over approach that could have resulted in windfall payments of about £650 to members and charities.

Portman Building Society, the third largest after Nationwide and Britannia, made a bid last year that potentially valued the Cheshire at up to £300m.

Although Cheshire, the 11th biggest society, recently reported a loss after falling victim to an alleged £10m mortgage fraud, its financial position is reasonably strong. It has assets of £4.7bn and reserves of £170m.

The Cheshire has 460,000 members who could get a windfall if it agreed to a takeover.

Members who joined since February 2000 have signed over any windfall benefits to charity, an attempt by the Cheshire board to deter carpetbaggers.

Cheshire members will be told of the decision to reject the bid in a mailing due to go out this week.

Jason Gaunt, the Cheshire marketing director, said last night: "The offer was unsolicited. We considered the approach and the board's considered view was that it served no useful purpose. It is best for our members to continue as a mutual."

Portman, which has 1.8 million members, is increasingly acquisitive. Analysts in the City raised the question of whether it might soon launch a hostile bid - an unprecedented step in the usually friendly building society sector.

Cheshire's chief executive Colin Whittle resigned last year. Karen McCormick, who was a non-executive, stepped up and now runs the society.

Ms McCormick became Cheshire chief executive in July and has been adamant that she intends to help the society stay independent. It made a loss of £2.1m last year due to the alleged fraud, which forced it to set aside £10m. It is hopeful that it can get the money back.

She may come under renewed pressure from members to consider a sale in the near future.

Portman issued a statement last night that said: "We can confirm that the Society contacted Cheshire Building Society with a view to discussing a possible merger, but its board decided not to enter into discussions. The Portman board is actively seeking merger opportunities in line with its strategic objectives. Mergers bring about efficiencies and economies of scale which they believe would benefit members of each society in terms of competitively priced products and services."

Earlier this month, Portman took over the Lambeth Building Society, the 20th biggest, in a deal expected to lead to windfalls of £400 per member.

The enlarged business will remain a mutual and will be named Portman Building Society.

Lambeth's chairman Richard Vaughan is joining the Portman board.

Portman has assets of almost £18bn and employs more than 2,300 staff, serving 1.8 million members through 143 branches.