Co-op in talks with Britannia building society

LONDON (Reuters) - The financial services arm of the Co-Operative Group is in "early" takeover talks with building society Britannia ahead of a legal change which would allow the two to merge, the two companies said on Sunday.

The combined group would have around 70 billion pounds of assets and 6 million customers.

Britannia, the country's second biggest building society, said the talks were at a very early stage and would cover a wide range of options as to how the two organisations could work together, including a possible future merger.

Britannia said in a statement it had similar values and shared a mutual ethos with Co-Operative Financial Services.

Britannia has an extensive branch network and a strong savings and mortgage franchise, it said, while CFS -- part of the Co-Operative Group, the world's largest consumer co-op -- has a strong personal and business banking franchise and life and general insurance expertise.

A spokesman for the Co-Operative Financial Services said the group had spoken to Britannia and other parties as part of its ambitious growth plans which were put in place a year ago.

"We're exploring a whole range of options and that might lead to a merger at some point in the future but then it might not," the Co-op spokesman said.

The spokesman said a full merger could not take place at the moment because mergers between mutuals and co-operatives were not currently allowed but this is likely to change either by the end of this year or early next year due to a bill in parliament.

A merger would also have to be approved in a vote by Britannia's members.