It was Bank Holiday Monday in the UK yesterday, so perhaps the bosses at CYBG were on a day off – perhaps that’s why they failed to inform the ASX that they had made an all-share takeover for Virgin Money worth more than £1.6 billion, or more than $A2.8 billion. A copy of the CYBG announcement was lodged with the ASX at 7.30 am Tuesday.
CYBG owns the Clydesdale and Yorkshire banks and is the company the National Australia Bank managed to spin off in 2016 (at last). The last time CYBG was in the news was late last month when they warned of £202 million (more than $A360 million) in new write downs and losses from the miss-selling of a British income protection insurance financial product.
Tens of thousands of Australian NAB shareholders are still holders of CYBG shares, but the all share bid for Virgin Money will reduce that holding dramatically. Sir Richard Branson’s Virgin Group is the biggest shareholder in Virgin Money with a 34% stake.
In a statement overnight Monday in London, Virgin Money (which what is known in Britain as a ‘challenger bank’ (as is CYBG) said it had “received a preliminary and conditional proposal from CYBG to acquire the entire issued and to be issued share capital of Virgin Money”.
Virgin Money acquired the branches and many customers of Northern Rock following its government bailout during the GFC a decade ago. Northern Rock was sunk by a depositors’ run over a few days which effectively drained the bank dry of cash and it had to be rescued.
Virgin said CYBG had offered to swap 1.1297 CYBG shares shares for each share in Virgin Money. “The Board of Virgin Money is in the process of reviewing this proposal,” it said, adding: “There can be no certainty either that an offer will be made nor as to the terms of any offer, if made. Accordingly, shareholders are advised to take no action in relation to this proposal.”
CYBG said in a statement that it “believes the combination would create the UK’s leading challenger bank with a powerful full-service banking offer for 6 million personal and business customers”.
It said that Virgin Money shareholders would control 36.5% of the combined group. Virgin Group will control more than 12% of the merged bank, if the deal happens.
Monday was a bank holiday in the UK so the stock exchange was closed. Virgin Money shares closed on Friday at 312.4p, up about 13% last week, taking them above from their 2014 flotation price of 283p. CYBG shares, which are up over 40 per cent in the past two years, closed at 318p.
At that price the offer value Virgin Money shares around 380p, a premium of around 20%.
CYBG shares closed at $5.40 on the ASX on Monday, giving it a market vale of around $5 billion, meaning the Virgin offer is worth 50% of that value.
