LONDON, Nov 10 (Reuters) - The Co-operative Group will scrap dividend payments to its 7.6 million members to help pay for a 1.5 billion pound ($2.4 billion) rescue of its banking division.
The decision is part of a review of Britain’s biggest customer-owned business - which also runs supermarkets, travel agencies and funeral services - by new Chief Executive Euan Sutherland, and could lead to more businesses being sold.
Co-op’s Chairman Len Wardle told members of the decision at the group’s general meeting in Manchester this weekend.
“Our decision not to pay a half-year interim dividend was not one that was taken lightly. But it was viewed by the board as necessary given the challenges facing the group at this time,” he said.
Co-op, which paid out 64 million pounds in dividends last year, will instead offer members discount vouchers in stores.
“We still want to make sure that we give some form of recognition for the loyalty that our members have shown so far this year,” Wardle said.
99.8 percent of members backed plans to rescue the Co-operative Bank which will hand control of the bank to investors including U.S. vulture funds.
Co-op Bank hit trouble after racking up big losses on commercial property. Many of the bad loans were acquired through its takeover of the Britannia Building Society in 2009 and the bank’s management has subsequently been overhauled.
Co-op Group has bowed to the demands of a group of bondholders including U.S. hedge funds Aurelius Capital and Silver Point Capital and agreed to a restructuring of the bank which will leave it with a 30 percent stake.
The group, which has already sold its life insurance and savings business, expects to sell its general insurance business during 2014, and further sales are possible.
“We have to take a long hard look at our businesses and be honest about their performance,” Chief Executive Euan Sutherland told members.