Nationwide Building Society has agreed a money deal to purchase Virgin Money for £2.9bn, which is able to make the merged business the second largest supplier of mortgages and financial savings within the UK.
The mutual says the transfer will enable it “to accelerate its strategy and broaden and deepen its products and services faster than could be achieved organically, whilst providing a return that would further support Nationwide’s financial strength and deliver greater value to its customers and members”.
The buyout, agreed by each boards, will carry collectively Virgin Money’s mortgage portfolio of £57.1bn and Nationwide’s £197.9bn home mortgage e-book, as of April final 12 months.
The deal will see Nationwide supply Virgin Money shareholders 218p a share and a 2p dividend, a 38% premium to Virgin Money’s undisturbed share value on 6 March.
The mixed group could have complete belongings of round £366.3bn and complete lending and advances of £283.5bn, the mutual says in a press release to the inventory change. Virgin Money is the sixth largest financial institution within the UK.
The mutual says: “The potential acquisition would allow Nationwide to extend its scale in its core lending and deposit markets and strengthen Nationwide’s position as one of many UK’s main suppliers of mortgages, financial savings and present accounts.
“Virgin Money 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.”
Nationwide Building Society chief govt Debbie Crosbie says: “Importantly, Nationwide will stay a building society, and a mixed group would carry the advantages of fairer banking and mutual possession to extra individuals within the UK.
“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.”
Virgin Money chief govt David Duffy provides: “The combined scale and strength would expand our customer offering and complete our journey in the banking sector as a national competitor.”
L&C Mortgages affiliate director David Hollingworth says: “Nationwide underlines its position as a superpower of the mutual sector in buying a considerable financial institution participant within the mortgage market.
“The mixture will create one other Goliath furthering Nationwide’s skill to straight tackle the large banking teams.
“This transfer would initially look to hold the downside of lowered competitors within the mortgage market.
Hollingworth provides: “Virgin Money has been very aggressive within the mortgage market and proven itself greater than able to going toe to toe with the foremost excessive avenue banks.
“At instances it has proven a capability to carry a special mind-set to the market and sought to innovate in its product choices.
“It additionally has a strong heritage in with the ability to take a extra versatile method for the correct clients to assist debtors that could be a bit outdoors the usual excessive avenue choices.
“That expertise will hopefully appeal to Nationwide rather than risk the gradual demise of the more individual approach that can be available through Virgin’s Clydesdale mortgage brand in particular.”
My Community Finance chief govt Tobias Gruber factors out: “While Nationwide has lengthy been related to safety and security, in recent instances we’ve seen it reinvent itself, underscored by a recent model refresh.
“As disruptors like Monzo and Revolut reshape the banking panorama, established banks have been sluggish to adapt.
“In distinction, Nationwide seems to have emerged from the shadows, seizing the chance to guide the cost in confronting the digital challenger banks head-on.
“It remains to be seen how its bold reinvention among potential customers will be received, but it’s certainly an intriguing journey to watch.”
Nationwide should make a agency bid to purchase Virgin Money by 5pm on 4 April, below takeover guidelines.
