LONDON, UK: Nationwide Building Society has agreed to acquire Virgin Money UK PLC for £2.9 billion in cash, in a deal that would create the UK’s second largest mortgage and savings provider.
Virgin Money shareholders would receive 220 pence per share, including a dividend of 2 pence, which is a 38% premium to the market price as of 6 March 2024. They would also keep the final dividend of 2 pence for FY2023, to be paid on 20 March 2024.
The boards of both companies said the deal would combine two complementary businesses and enable Nationwide to expand its products and services, while remaining a building society and a modern mutual.
The deal is subject to due diligence and regulatory approvals, and is expected to close in the second half of 2024.
Chairman of Nationwide Building Society, Kevin Parry commented: “A combination with Virgin Money would accelerate Nationwide’s strategy and create a stronger, and more diverse, modern mutual.
The combination would increase Nationwide’s scale and financial strength, put us in a stronger position to continue to provide Fairer Share Payments to eligible Nationwide members, and offer rates for mortgages and savings that are, on average, better than the market average.”
Chief Executive Officer of Nationwide Building Society, Debbie Crosbie commented: “Importantly, Nationwide will remain a building society, and a combined group would bring the benefits of fairer banking and mutual ownership to more people in the UK, including our continuing commitment to retain existing branches, as part of our ‘Branch Promise’ and leading levels of customer service.
We believe the combination would create a stronger and more diverse business that will be better placed to deliver value to our members and customers, both now and in the future.”
Chairman of Virgin Money UK PLC, David Bennett commented: “The Board of Virgin Money is pleased that Nationwide recognises the considerable strengths and opportunities that exist across our business, with the potential acquisition delivering attractive value for our shareholders. We are confident that a combination would support an exciting new chapter for Virgin Money to benefit from Nationwide’s scale and ambition.”
Chief Executive Officer of Virgin Money UK PLC, David Duffy commented: “This potential transaction with Nationwide represents an exciting opportunity to build on the significant progress we have made in becoming the only new Tier 1 bank in recent history. The combined scale and strength would expand our customer offering and complete our journey in the banking sector as a national competitor.”
The cash consideration necessary to satisfy the Potential Acquisition in full would be funded from Nationwide’s existing cash resources. It is not anticipated that the Potential Acquisition, should it proceed, would require any immediate changes to the capital structure of the Virgin Money group or the combined group as a whole.
Virgin Money licenses certain rights to use the “Virgin Money” brand from Virgin Enterprises pursuant to a trade mark licence agreement (the “TMLA”). Nationwide recognises the significant role that the “Virgin Money” brand has played in the development of the Virgin Money group over time. However, as part of its longer-term integration strategy, Nationwide intends for the Virgin Money business to re-brand over time.
Prior to this announcement, Nationwide has entered into a legally binding agreement with Virgin Enterprises pursuant to which the parties have agreed that the TMLA would be terminated on the fourth anniversary of completion of the Potential Acquisition, following which the Virgin Money group would have a two-year period during which it would be required to complete its re-branding. In addition, Nationwide and Virgin Enterprises are currently exploring options for a potential partnership relating to the expansion of the Virgin Red loyalty programme to customers of the combined group.
Virgin Group Holdings Limited (“Virgin Group”) has also confirmed to Nationwide that, should a firm offer be made on the same financial terms as the Potential Acquisition, it would be minded to support such a firm offer by voting in favour of the related scheme of arrangement or accepting the offer (as applicable). Virgin Group holds 188,083,550 Virgin Money Shares (representing approximately 14.5% of the total number of Virgin Money Shares in issue).
Virgin Group believes that Virgin Money will continue to ‘change business for good’ as part of the combined group and welcomes the opportunity to further explore options for a potential partnership to extend the Virgin Red loyalty programme to customers across the combined group.
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