The firms have signed a share purchase agreement under which the building society will acquire the entire issued share capital of Co-op Bank.  

The combined group will be led by the mutual’s chairman David Thorburn and chief executive Steve Hughes.  

The mutual says the combination will “deepen the enlarged group’s existing presence in mortgages and savings and extend the society’s propositions”.  

It adds that the move will give the larger group a balance sheet worth £89bn, provide it with “an established position” in personal current accounts, as well as boosting its branch network and other distribution channels.     

The building society will integrate the bank “gradually over several years” 

It adds: “During this period, the society and the bank will continue to operate under their current names and branding while the work required to provide more integrated services in the future is carried out.”  

The mutual says that “up to £125m” of its offer will be deferred for three years depending on the future performance of the bank.  

The Co-op Bank’s hedge fund owners spent £700m to pull the bank out of a financial black hole in its accounts seven years ago.  

The mutual’s members will not be offered a vote to approve the takeover.  

Coventry Building Society’s Hughes says: “By bringing together Coventry Building Society and The Co-op Bank we will be able to deliver more value to more people in the coming years.”  

Co-operative Bank Holdings chairman Bob Dench adds: “This transaction sees The Co-op Bank returning to mutuality.”  

Earlier this week, Virgin Money shareholders voted to accept a £2.9bn takeover offer from Nationwide, which will create the second-largest mortgage lender in the UK.