Merger Update

RNS Number:8088I
Portman Building Society
12 September 2006

Date Issued: 12 September 2006

No Embargo





NATIONWIDE AND PORTMAN BUILDING SOCIETIES ANNOUNCE DECISION TO MERGE UNDER NEW 
CHIEF EXECUTIVE



The Boards of Nationwide and Portman Building Societies today announce that they
have agreed to merge. This will be the biggest ever building society merger; the
enlarged Society being the UK's leading mutual organisation with total assets of
over #150 billion, and will be named Nationwide Building Society. The merger is
expected to become effective by the end of September 2007, subject to approval
being given by Portman members, confirmation by the Financial Services Authority
(FSA), and approval by the Office of Fair Trading.



The chief executive of Nationwide, Philip Williamson and the chief executive of
Portman, Robert Sharpe, will continue in their current roles for the time being.
Graham Beale, currently group finance director at Nationwide, will become chief
executive of Nationwide on 1 April 2007 and subsequently of the enlarged Society
on completion of the proposed merger.



In the view of the Boards of Nationwide and Portman, the proposed merger will
deliver significant strategic, operational and financial benefits to the
enlarged Society:



Benefits to Members



*         The enlarged Society will continue to be a mutual building society:
owned by and run for the benefit of its members; offering its members
attractively priced products and services; and remaining highly competitive in
its chosen markets.

*         It will be well placed to generate substantial financial benefits and
will build on Nationwide's and Portman's excellent track record for delivering
pricing benefits to members.

*         The proposed merger will provide members with access to a larger
network of branches and agencies and will improve access to products and
services.  Building on a recent investment of #300 million in Nationwide's
branch network, Nationwide, like Portman, remains committed to sustaining a
comprehensive branch network, and the enlarged Society will benefit from over
880 locations across the UK.

*         Portman members will have access to current account and credit card
products, not previously available to them as members of Portman.  Nationwide
members will have access to a new range of wealth management and financial
planning services.  The combination of Nationwide and Portman will also create a
wider range of specialised mortgage products including self-certificated,
buy-to-let and non-prime mortgages and an improved intermediary mortgage lending
operation.

*         Qualifying saving and qualifying borrowing members of Portman are
expected to receive a minimum merger bonus of #200 (pre-tax) (see notes to
editors for further details), representing a distribution of over 70% of
Portman's general reserves at 30 June 2006.



*         In addition to the merger bonus, Portman members will benefit from a
continued membership interest in the enlarged Society (which will have pro
forma reserves of #5.5 billion), from efficiencies of scale and from sharing
in the financial benefits arising from the merged group.



Benefits of Scale



*         The enlarged Society will have assets in excess of #150 billion. It
will benefit from having a leading position in both the mortgage and savings
markets and will have over 13 million members.  It will be the second largest
mortgage lender and the second largest retail savings provider in the UK.

*         The efficiencies of scale generated by the proposed merger, and from
the integration of Nationwide's and Portman's networks and capabilities, will
provide significant opportunities to enhance growth in core markets.

*         The enlarged Society will be in a stronger position to play a leading
role in growing a modern and healthy mutual sector in the UK and to champion
consumer issues.  A merger of Nationwide and Portman will create a compelling
alternative to the big retail banks.



Benefits to Employees



*         The Boards of Nationwide and Portman attach great importance to
retaining the skills and experience of their respective management teams and
employees. The management teams of Nationwide and Portman will be combined in
order to obtain the maximum benefit from their skills and experience.

*         The enlarged Society will be in a strong position to attract and
retain the industry's best people, and to provide great career opportunities for
its employees.





Board and Operational Structure



*         Nationwide is pleased to announce that Graham Beale, currently group
finance director, has been appointed as the new chief executive to succeed
Philip Williamson.  He will take over responsibility for Nationwide on 1 April
2007 and subsequently for the enlarged Society on completion of the proposed
merger.  Robert Sharpe will retire from his position as chief executive of
Portman on the date of the proposed merger.



*         It is anticipated that the Board of the enlarged Society will consist
of 14 directors - six executive directors and eight non-executive directors,
providing a strong and experienced team with extensive skills and expertise in
managing highly successful mutual businesses.

*         As already announced, the current chairman of Nationwide, Jonathan
Agnew, will retire in July 2007 at the end of his five year term.  He will be
succeeded by Geoffrey Howe, currently deputy chairman of Nationwide.  Bill Tudor
John, currently chairman of Portman, will become a deputy chairman of the
enlarged Society. Including the chairman of Portman, five members of the Portman
Board will join the Board of the enlarged Society.



*         Nationwide's existing Head Office in Swindon will be the Head Office
of the enlarged Society.  Its major administrative centre in Northampton will
continue in its present role.

*         Portman's current Head Office, based in Bournemouth, will be a key
business centre within the enlarged Society and will remain a significant
employer in that region.  The enlarged Society will consider, in due course, the
locations of other offices to ensure it is best placed to serve the needs of all
its customers.

*         It is intended that the majority of Portman's branches will be
incorporated into the network of the enlarged Society and rebranded Nationwide.
Clear overlaps between the two networks will be assessed over the coming months.



Process and Timetable



*         Eligible savers and eligible borrowers of Portman will receive a
merger booklet in early 2007, including further details of the proposed merger,
together with notice of the Portman AGM which will take place in Spring 2007.
Eligible savers and eligible borrowers of Portman will be asked to vote on the
proposal to merge at the Portman AGM. The Board of Portman will recommend that
its members vote in favour of the merger resolutions to be proposed at the
Portman AGM.

*         The FSA has given consent to Nationwide approving the merger by Board
resolution.

*         Portman members requiring further information about the merger should
call 0845 840 6000.  Nationwide members requiring further information about the
merger should call 0845 20 50 150.



Philip Williamson, Nationwide's chief executive said: "This is great news for
members of both societies. As a result of the merger, 13 million people will be
members of a bigger and even better society, offering market leading products
and pricing, underpinned by a strong commitment to mutuality.  We are really
looking forward to welcoming customers and employees of Portman to the world's
number one building society, which will be the second largest mortgage lender in
the UK and will reinforce Nationwide's present position as the second largest
provider of retail savings.  Together, I know we will be in an even stronger
position to provide our members with better product pricing and to continue to
be the first choice for millions of consumers."



Robert Sharpe, chief executive of Portman, said: "This important decision to
merge two of the largest and most successful UK building societies will create
an organisation of formidable strength and size.  If building societies are to
continue to compete successfully with the retail banks, they need to enjoy
comparable economies of scale.  This is a great deal for Portman members. They
will receive a significant merger bonus, will enjoy an ongoing interest in the
enlarged Society and will benefit from improved access to a broader range of
highly competitive products and services."



                                     -ends-





Notes to editors:



*         Nationwide is the UK's largest building society, while Portman is the
third largest.

*         Since 1996, Nationwide has delivered member benefits of over #4 
billion. Portman has appeared in Best Buy tables for mortgages or savings every 
week for the last three years.

*         A biography of Graham Beale, group finance director and chief
executive designate of Nationwide, is attached.

*         Eligible savers and eligible borrowers of Portman will receive further
details of the proposed merger in advance of Portman's 2007 AGM, together with
details of the merger bonus arrangements. Bonus payments to qualifying savers
will be based on the lower of account balances at the close of business on 11
September 2006 and a future date which will be specified in the merger booklet.
A minimum savings balance as at the close of business on 11 September 2006 of
#100 will be one of the requirements, as will continuous shareholding membership
between the two dates. Details of the merger bonus for qualifying Portman
borrowers will be specified in the merger booklet. A minimum mortgage balance as
at the close of business on 11 September 2006 of #100 will be one of the
requirements. Payment of the merger bonus is dependent upon approval of the
merger by Portman members, confirmation by the FSA and the required regulatory
approvals.





About Nationwide



Nationwide is the largest building society in the world, the fourth largest
mortgage lender and the second largest retail savings provider in the UK.



The Nationwide Group employs over 16,000 people, serves 11 million members and,
as at 4 April 2006, had total assets of #120.6 billion and general reserves of
#4.8 billion. In the last financial year the Society reported that costs as a
percentage of mean total assets reduced for the 17th successive year to 0.85%.



Nationwide has a network of around 680 branches.  Its Head Office is in Swindon
and it has an administration centre in Northampton.



The Society offers a comprehensive range of personal financial services,
including credit cards, online banking, insurance, mortgages, savings and
investments.



In the most recent financial year the Society reported record profit before tax
of #559.2 million (2005 - #513.9m) and members benefited by an estimated #690
million in the year through competitive interest rates and lower fees and
charges, up 7% on 2005.  Since 1996 the Society has made its members over #4
billion better off because they chose to put their trust in Nationwide rather
than to bank with its plc competitors.



Nationwide enjoys the Investors in People's exclusive "Champion" status and for
the last two years has been voted one of the top 3 Best Big Companies to Work
For (as compiled by the DTI in association with The Sunday Times).



About Portman



Portman is the third largest UK building society and the 13th largest UK
mortgage lender. In the period 2000 to 2005, Portman was the fastest growing top
ten building society in terms of total assets.



The Portman Group employs over 2,500 people, serves 1.8 million members and, as
at 30 June 2006, had total assets of #18.7 billion and general reserves of #704
million. Pre-tax profit for the six months ended 30 June 2006 was #44.5 million
(#85 million for the full year ended 31 December 2005).  On 30 September 2006,
it will have completed a merger with Lambeth Building Society, adding another
#1bn of assets to the combined balance sheet.



Portman has a network of 143 branches, which will expand to 149 on completion of
the merger with Lambeth Building Society. Its Head Office is in Bournemouth and
it has an administration centre in Wolverhampton.





Contacts:



Nationwide

Alan Oliver, head of external affairs: 020 782 62188 (on Tuesday 12 September
2006)



Mobile: [phone]



Steve Blore, senior manager: 020 782 62147 (on Tuesday 12 September 2006)



Mobile: [phone]



Morgan Stanley & Co Ltd - Financial Adviser to Nationwide

William Chalmers: 020 7425 8000



Portman

Helen Shaw, group communications manager: 01202 562256



Mobile: [phone]



JPMorgan Cazenove - Financial Adviser to Portman

Conor Hillery: 020 7588 2828



Allen & Overy LLP has acted as legal adviser to Nationwide. Addleshaw Goddard
LLP has acted as legal adviser to Portman.



Photography

Nationwide Building Society chief executive, Philip Williamson, Portman Building
Society chief executive, Robert Sharpe, and chief executive designate, Graham
Beale, will be available for photography at 11am Tuesday 12 September following
the announcement that Nationwide and Portman are to merge.  All three will be
available at Nationwide Building Society, Hogarth House, 133/136 High Holborn,
London, WC1V 6PW.



In addition, for individual high resolution images of both Philip Williamson and
Graham Beale, please follow this link: 
http://www.nationwide.co.uk/mediacentre/photo_library.asp.  
Photographs of Robert Sharpe are available on request.







Morgan Stanley & Co Ltd is acting as financial adviser to Nationwide and no one
else in connection with the matters described in this announcement. In
connection with such matters, Morgan Stanley & Co Ltd, its affiliates and their
directors, officers, employees and agents will not regard any other person as
their client nor will they be responsible to any other person for providing the
protections afforded to their clients.



JPMorgan Cazenove is acting as financial adviser to Portman and no one else in
connection with the matters described in this announcement. In connection with
such matters, JPMorgan Cazenove, its affiliates and their directors, officers,
employees and agents will not regard any other person as their client nor will
they be responsible to any other person for providing the protections afforded
to their clients.


                      This information is provided by RNS
            The company news service from the London Stock Exchange
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