JC Flowers considers making a move for Skipton Building Society

Published 26th Sep 2010

J C Flowers, the US private equity investor, has recruited the former head of Skipton Building Society as it considers an assault on the leading mutual.


John Goodfellow, who ran Skipton – the UK's fourth-largest building society – for 17 years until his exit in December 2008, is advising the acquisitive private equity house on the mutuals sector.

His appointment, which has been confirmed by The Sunday Telegraph, is understood to be a precursor to a potential bid for the 153-year-old building society which has 850,000 members and £16bn of assets. It comes hot on the heels of the exit of Tom Wood, Skipton's finance director, earlier this week.

A former associate of JC Flowers, who asked not to be named, said that Mr Goodfellow's appointment would only make sense if the private equity house were considering an assault on a major name, such as the Skipton. It is believed Skipton is next on JC Flowers' radar as part of a buy-and-build strategy aimed at consolidating the sector.

The private equity house is known to have a strong interest in the building society market, and attempted to buy Northern Rock at the end of 2007. The sector is seen as ripe for consolidation due to the large number of small players and the increasing regulatory cost and capital requirements which mutuals face – a burden that has increased since the onset of the financial crisis.

Last December, the Chelsea and the Yorkshire building societies merged to create the UK's third largest mutual after the Chelsea recorded a £26m loss following fraudulent activity in its buy-to-let and self-certification mortgage arm.

Run by and named after former Goldman Sachs financial institutions banker Chris Flowers, JC Flowers announced last month its plan to take a £50m stake in Kent Reliance building society – which has 180,000 members – as part of a restructuring designed to raise new capital.

Speaking shortly after the deal was announced, David Morgan, JC Flowers' managing director for Europe and Asia, said there could be more to come: "We're always looking for interesting investments... and it wouldn't be surprising if other societies had interest in a similar partnership. We are very active in this part of the world at the present."

Speaking to The Sunday Telegraph, Mr Goodfellow confirmed his appointment: "I'm officially there to help them understand the mutual sector." He explained that he had been approached to help to "explain the ins and outs" of the mutual world, in particular focusing on the different way societies view their members.

He downplayed suggestions that his former employer was a target, saying: "I wouldn't have thought there is a next step as yet identified. My job is to be here, identify the sector and work out how we view it."

The reasons behind Mr Wood's exit from Skipton are unclear. A brief statement from the company said only that he was "moving on to develop his career". He will be replaced by Richard Twigg, commercial director, who held the finance role for seven years until June 2009.

Mr Goodfellow, a former chairman of the Building Societies Association who still lives in Skipton, was credited with expanding the society from its core base into a number of areas, such as its estate-agency division, Connells. He joined the society in 1984 to lead its technology strategy, and became chief executive in 1991.

A spokesman for JC Flowers confirmed the appointment, saying: "Following the recent agreement reached between JC Flowers and Kent Reliance, John has agreed to work as an adviser to JC Flowers in respect of its activities in the mutual sector."

Source: ' Sunday Telegraph '

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