£2.9bn deal

Crosbie leads Nationwide swoop on Virgin Money

Debbie Crosbie, CEO of Nationwide which has swooped on Virgin Money (pics: Terry Murden / DBMS)

Nationwide Building Society boss Debbie Crosbie is leading a £2.9 billion takeover bid for Virgin Money, formerly Clydesdale and Yorkshire bank where she worked for more than two decades.

The proposed acquisition will create the second largest provider of mortgages and savings in the UK with total assets of £366.3bn and lending and advances of £283.5bn.

Nationwide said it remains “wholly committed to being a building society and a modern mutual” and has pledged no job losses at Virgin “in the near term”.

Virgin Money’s bases in Glasgow and Newcastle will be protected and the bank will continue to be run separately with its own board, and the brand will continue for about six years when it will be replaced by the Nationwide brand.

The board of Britain’s biggest building society said it believes the acquisition would enable it to accelerate its strategy and broaden its products and services faster than could be achieved organically.

The 220p per share cash deal, including a proposed 2p dividend, represents a premium of 38% to Virgin Money’s closing price last night.

The move will be seen as further consolidation among mid-market banks which have attempted to challenge the established high street titans. Tesco Bank has been sold to Barclays while Sainsbury’s is withdrawing from banking.

Virgin Money was acquired by Clydesdale and Yorkshire bank which adopted its branding and is now the UK’s sixth largest retail bank by total assets with a customer base of approximately 6.6 million and total lending of £72.8 billion.

It has a mortgage portfolio of approximately £57.1bn and deposit portfolio of approximately £67.3bn.

It has a strong unsecured lending business, with £6.7bn of balances, including an estimated 8.6% market share of UK credit cards, which the Nationwide Board believes would complement Nationwide’s existing product offering and unsecured lending.

The Nationwide board believes that Virgin Money’s £9bn of existing business lending balances and ‘Business Current Account’ would enable Nationwide to build on its existing business savings proposition, with a broader business banking offering to support Nationwide’s growth and diversify its sources of funding.

Nationwide said it would seek to integrate Virgin Money gradually over multiple years into the Nationwide group, prioritising good customer outcomes following the completion of comprehensive planning and engagement with relevant stakeholders.

In the medium term, Virgin Money would continue to operate as a separate legal entity within the Nationwide group, with a separate board of directors and a separate banking licence.

177 Bothwell street
Virgin Money has moved into newly-built offices in Glasgow

Nationwide intends that the combined group would retain the Virgin Money brand in the medium term, but has agreed with Virgin Enterprises Limited that it would cease doing so over a six-year period from completion of the acquisition, by which point Nationwide would intend to have re-branded the Virgin Money business.

Nationwide has the largest single-brand branch network in the UK and is committed to maintaining its breadth of coverage. Nationwide would keep its ‘Branch Promise’ and, from completion, it intends to retain a branch everywhere where the combined group is present, until at least the start of 2026.

This would be subject to any relevant plans and proposals for branch closures that have already been approved by Virgin Money, and which are ongoing as at completion. In addition, Nationwide values Virgin Money’s ongoing presence in Glasgow and Newcastle.

The Nationwide Board believes that Virgin Money’s purpose and principles are well aligned with those of Nationwide. Nationwide said it values the skills and experience of Virgin Money’s approximately 7,300 full time equivalent workforce and believes the Potential Acquisition would be an opportunity to harness the talent of this group.

Nationwide “does not intend to make any material changes to the size of the Virgin Money employee base in the near term”, and would safeguard the existing contractual and statutory rights of Virgin Money employees, including pension arrangements and redundancy policies.

The Virgin Money board has concluded that, should a firm offer be made on the same financial terms as the potential acquisition, it would be minded to recommend it to Virgin Money shareholders.

Sara Weller, the Virgin Money director who is appointed to the Virgin Money board as a representative of Virgin Enterprises, has not been involved in Virgin Money board discussions relating to aspects of the acquisition specifically concerning the brand licence agreement with Virgin Enterprises, the Virgin brand and the Virgin Red loyalty programme.

David Duffy
David Duffy, CEO of Virgin Money

Virgin Money has made a positive start to the year and carries good momentum into FY2024 as it continues to execute its strategy. As set out in its trading update on 6 February 2024, in Q1 FY2024 Virgin Money delivered continued growth in relationship deposits and target lending segments, whilst maintaining a stable margin and with ongoing cost efficiencies absorbing inflation.

Virgin Money continued to maintain a robust funding and capital position in the quarter, with credit quality trends consistent with FY2023 and increased coverage levels.

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.”

Ms Crosbie, chief executive of Nationwide, spent nearly 22 years at Clydesdale and Yorkshire, becoming chief operations officer before leaving to join TSB and ahead of CYBG’s change to Virgin Money. She took up her current role in June 2022.

She commented: “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 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 of Virgin Money UK, 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.”

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