Nationwide Building Society has confirmed its bold move of taking over Virgin Money in a deal valued at £2.9 billion. This acquisition was confirmed a fortnight after the initial merger conditions were established, posing a significant challenge to the UK’s top banks. Debbie Crosbie, the chief executive of Nationwide, has made this strategic move to diversify into business banking and enhance its stake in the mortgage market.
As the acquisition agreement stipulates, Nationwide will pay 218p per share in cash for Virgin Money’s stocks, along with a 2p final dividend. This news was revealed by the companies on Thursday. The merged company will reportedly have an enormous asset of £366 billion. Nationwide has also revealed plans to eventually discontinue the use of the Virgin Money brand.
Virgin Direct, as it was originally known, was co-founded by Jayne-Anne Gadhia in 1995. Virgin Money was later acquired by Clydesdale & Yorkshire Banking Group (CYBG) for £1.7 billion in 2018, whilst maintaining the Virgin brand.
Crosbie stated that this acquisition empowers Nationwide, enhancing its value proposition and expanding its services for both existing and future members. She noted that the acquisition price reflected a 38% premium on the stock value of Virgin Money before the announcement of the acquisition agreement.
Virgin money has been battling a slump over the past 12 months and last year had to increase its allotment for bad loans. Its performance has been marred in recent years by elevated compensation deductions tied to the mis-selling of payment protection insurance.
David Duffy, the chief executive of Virgin Money, is optimistic about combining forces with Nationwide, highlighting it as an exciting prospect to continue on the trajectory of Virgin Money’s strategic and operational advancement. Duffy and Crosbie have had a professional relationship in the past, when Duffy, as the former chief executive of AIB, teamed up with Crosbie, the chief operating officer then, at CYBG in 2015- a position Crosbie held for four years before assuming leadership at TSB Bank. {Copyright The Financial Times Limited 2024}