CYBG, the mostly Australian owned UK bank, has lifted its offer for Virgin Money as expected from 1.6 billion pounds to 1.7 billion pounds ($A2.99 billion) on the eve of the expiration of a key deadline for the offer.
A statement released to the ASX before trading yesterday morning said the offer terms had been changed to effect a 7% rise in the value of the all share offer.
CYBG had until 2 am Tuesday, Sydney time to make a firm offer or walk away from Virgin, under rules set down by Britain’s Takeover Panel.
Since the original offer, Virgin has been tight-lipped about the bid, saying only that it was reviewing the proposal.
To allow more time for negotiations, both sides are likely to request a week-long extension to negotiations to settle a deal.
The higher price is needed from CYBG to offset the fall in its share price which has cut the value of its all share offer.
The statement had the required effect, the shares rising 6% on the ASX yesterday to $5.30.
In yesterday’s statement CYBG said :
“Under the terms of the Revised Proposal, CYBG would acquire the entire issued and to be issued ordinary share capital of Virgin Money on the basis of an exchange ratio of 1.2125 new CYBG shares for each Virgin Money share, which implies that Virgin Money shareholders would own approximately 38% of the combined group.
"Virgin Money shareholders would also be entitled to retain any dividend declared and paid in respect of the interim period ending 30 June 2018, subject to the reservations set out below in this announcement.
"In determining that it would enter into discussions with CYBG, the Board of Virgin Money noted the improvement in the terms of the proposal (a seven per cent. increase in the exchange ratio as compared to the announcement on 7 May 2018), and, in particular, the potential for accelerated value creation through an upfront premium, coupled with the opportunity to participate in the continuing progress of the combined group, including sharing the substantial synergy potential resulting from the Proposed Combination, and benefitting from growth opportunities available to a national full-service competitor in the UK banking market.
“Discussions are ongoing regarding other terms and conditions of the Proposed Combination and reciprocal due diligence is being conducted.
“Separate discussions and due diligence are also ongoing between CYBG and Virgin Enterprises Limited in respect of the license of the Virgin Money Brand to the combined group, which is a pre-condition to the Proposed Combination as set out below in this announcement,” the CYBG statement said.
