Royal London strikes £220m deal for Co-op life and funds arms

Royal London has finally agreed a £219 million deal to buy the Co-operative Banking Group's life insurance and funds business after a protracted negotiation process that required the intervention of the regulator.

Royal London first announced the proposed acquisition in July 2011, but talks have taken more than 18 months to arrive at a binding agreement.

In January this year the Financial Times reported that the Financial Services Authority was set to meet to discuss applying a waiver to its normal rules that would require Royal London to make a profit from the administration of the Co-op's life business.

Under the terms of the deal, Royal London will acquire Co-operative Insurance Society, together with Co-operative Asset Management, in a move that will swell the provider's assets from £50 billion to £70 billion.

The fund business includes Michael Fox's CIS Sustainable Leaders and CIS Sustainable World Trust funds.

Royal London will pay £39 million upfront, with £180 million deferred until certain conditions are met. Royal London said the CIS Long Term Business Fund it would acquire would be maintained for the benefit of its with-profits policyholders. 'This is consistent with the manner in which Royal London manages other funds within its group,' it said.

The deal is subject to regulatory approval and the approval of members at an extraordinary general meeting to be held by mid 2013.