Britain’s Nationwide Building Society has reached a "preliminary" agreement to buy Virgin Money UK PLC for £2.9 billion ($A5.57 billion) in a deal that would create the second-largest provider of mortgages and savings in the UK.
In June 2018, CYBG (it was also listed on the ASX at the time), the owner of Clydesdale Bank and Yorkshire Bank, agreed to buy Virgin Money for £1.7 billion.
Under the deal, all the group's retail customers were moved to Virgin Money over the next three years. It would be the UK's sixth-largest bank, with about six million customers, and was Virgin Money.
Now, nearly six years later, Virgin Money (whose CDIs – CHESS Depository Interests – are listed on the ASX and closed at $A3.07 on Thursday, up 0.99%) is to be snapped up by one of the majors of UK home lending.
The all-cash offer is worth 220 pence per Virgin Money share, comprising 218p cash plus a proposed 2p dividend to be paid by Virgin Money prior to completion. The 220p is equal to $4.24 a share.
Virgin Money said should a firm offer be made on the same financial terms, it would be "minded to recommend" it to shareholders. It has the support of the brand owner Virgin Group.
Virgin Money pointed out there had been a series of proposals from Nationwide, and the latest offer is a premium of 38% to its closing share price on Wednesday of 159.05p.
Shares in Virgin Money ended up 35% to 214.70p in London after the offer news was released.
The combined group would have total assets of around £366.3 billion ($A704 billion) and total lending and advances of around £283.5 billion ($A546 billion), the two companies said in a statement.
Nationwide said the integration would take place over "multiple" years and pledged to retain a branch everywhere where the combined group is present, until at least the start of 2026.
The building society said it will not make any "material changes" to the number of Virgin Money employees in the near term.
Virgin Money licenses certain rights to use the 'Virgin Money' brand from Virgin Enterprises through a trademark license agreement (TMLA).
Nationwide said the TMLA would be terminated on the fourth anniversary of completion of the deal, and Virgin Money re-branded over time.
Virgin Group Holdings Ltd, which holds a 14.5% interest in Virgin Money, said it would support a deal on the same financial terms.
