The Boards of Charter Court and OneSavings Bank (OSB) have confirmed that they are in advanced discussions regarding a possible all-share combination of the two companies.

Under the proposed terms, OSB would acquire all the share capital of Charter Court on the basis of an exchange ratio of 0.8253 new OSB shares for each Charter Court share.

On this basis, on completion of the Possible Combination, OSB shareholders would hold approximately 55% and Charter Court shareholders would hold approximately 45% of the combined group.

It is proposed that Andy Golding, currently CEO of OSB, will become CEO of the combined group.

The Boards of Charter Court and OSB believe that the Possible Combination would “create a highly compelling opportunity” to create a “leading specialist mortgage lender in the UK with greater scale and resources to deploy on growth opportunities.”

In a statement, they said they would maintain two independent broker distribution platforms and “maintain operational centres of excellence to drive service levels and platform efficiency”.

Nick Field, director at international mid-market M&A firm, Livingstone, said: “As both OSB and Charter Court have attractive net interest margins around 3%, a track record of good quality growth, and strong positions in specialist products we see this as largely a merger of equals, which is reflected in the all-share deal structure.

“Because both businesses lend across a relatively full range of specialist products and have each invested to develop both retail and wholesale funding capabilities, we would expect operating costs to be the primary area of short-term synergy opportunity.

“As the UK specialist finance market is undoubtedly experiencing some reduction in demand arising from economic uncertainty, consolidation presents a compelling opportunity to deliver incremental profitability independent of market growth.”