A preliminary agreement has been entered whereby Nationwide Building Society intends to acquire Virgin Money – a venture helmed by ex-AIB leader David Duffy – through a £2.9 billion (€3.4 billion) transaction. This move would strengthen Nationwide’s credibility as a strong rival to the four leading banks in the UK. Nationwide’s proposed deal stipulates a 220p payout for each Virgin Money share, as well as a closing 2p dividend, signifying a 38% increase from the bank’s closing shares on the previous Wednesday.
The merger, should it be finalised, would culminate in an accrued asset total of around £366 billion for the combined entity, establishing them as the second-largest provider of savings and mortgages in the UK. This comes as Nationwide’s newest endeavour to merge with lenders in the middle tier who are finding it hard to outmatch bigger banks. Over the last year, a jump in credit card debts coupled with the living cost crisis has deduced Virgin Money’s performance.
Nationwide announced on Thursday that the Virgin Money acquisition will speed up its strategy implementation while also expanding its product and service range more quickly than it could’ve organically. This takeover, according to Nationwide, will grant it enhanced access to various money sources, especially company deposits.
This acquisition is a unique case of a mutual company acquiring a publicly-traded one. According to the preliminary agreement, along with the last dividend, Nationwide would provide a 218p per share cash payment. Virgin Money’s shares witnessed a 36% surge, reaching 217p early in trading.
According to Benjamin Toms, an analyst with RBC Capital Markets, this deal could possibly enhance competition in the UK for savings and mortgages and augment the building society’s mortgage market share from 12.2% to 15.7%. Virgin Money is set to operate as an independent business within Nationwide for the time being, before it’s eventually incorporated into the brand over the next six years.
As per the announcement by the building society, there are currently no plans to make significant modifications to Virgin Money’s worker strength, which is approximately 7,300. Provided a definitive offer is presented, the Virgin Money board expressed readiness to back it. The Virgin Group, owning 14.5% of the Virgin Money shares, also revealed its support for a deal that ensures it gains from Nationwide’s substantial investments.
Established following CYBG’s acquisition of the junior Virgin Money company in 2018, the Virgin Money brand emerged as CYBG absorbed the operations of Clydesdale and Yorkshire Banks. However, both firms alerted their public to the reality that a concrete proposition was not guaranteed. – Source: Financial Times Limited 2024
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