Pru may bid pounds 450m for Birmingham Midshires
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Your support makes all the difference.Prudential, the UK's largest insurer, is believed to be stalking Birmingham Midshires Building Society as part of its strategy to turn itself into a banking, mortgage lending and financial services institution.
Senior figures at the Pru, which is led by the chief executive Peter Davis, are known to have discussed a pounds 450m takeover bid for Midshires, Britain's 10th-largest society.
Sources said yesterday that executives at Birmingham Midshires are braced for a bid approach, which they believe could offer them the opportunity, under the Pru umbrella, to transform the society into one of Britain's largest mortgage lenders and deposit takers.
The Pru yesterday refused to comment on its ambitions concerning Birmingham Midshires.
News of the insurers' potential move came as Birmingham Midshires yesterday confirmed that it had proposed a merger with its smaller Midlands' rival, West Bromwich.
Mike Jackson, chief executive at Birmingham Midshires, said: "We can confirm that we have written to West Bromwich to express an interest in forming a partnership to bring the two organisations together. You should not read into that that we have made a formal bid."
The letter from Birmingham Midshires was sent six weeks ago to John Baker, chairman of West Bromwich. The reply received by Midshires earlier this week, said that its board had "noted" the approach.
Birmingham Midshires said that if a merger were to take place, West Bromwich members might benefit from a cash hand-out to sweeten the deal. But a Midshires' spokesman declined to give further details.
A merger would push Midshires into sixth place, with almost 1.2 million savers and 180,000 borrowers.
Midshires, about five times larger than the West Bromwich, has about pounds 7.7bn of mortgage assets after an aggressive acquisition strategy of other lenders' mortgage books. It made profits of about pounds 44m last year.
West Bromwich has about pounds 1.5bn of assets. The society, which made pounds 6m profit in 1995, has about 40,000 borrowers and 300,000 savers.
Sources within Birmingham Midshires believe that a takeover bid by Prudential need not hinder its own bid for West Bromwich, but could form part of a wider strategy to develop the society into a dominant lending and savings institution.
The society's announcement follows earlier speculation that the Building Societies Commission, the industry's regulator, had asked Birmingham Midshires to step in and merge with West Bromwich if it was to face serious financial problems.
West Bromwich has been mired in a pounds 30m legal battle with several thousand borrowers who took out mortgages to provide an income for themselves while paying off their loans. But the collapse in house prices and soaring interest rates led to borrowers plunging deeply into debt.
West Bromwich said yesterday that it was not in financial difficulties. The society expects to announce sharply increased profits for the year ending March 1996.
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