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Virgin Money receives improved offer from Clydesdale Bank owner Virgin Money receives improved offer from Clydesdale Bank owner
(about 3 hours later)
The owner of Clydesdale and Yorkshire banks has improved its £1.6bn offer for Virgin Money in an attempt to create Britain’s sixth-largest bank, with 6 million customers.The owner of Clydesdale and Yorkshire banks has improved its £1.6bn offer for Virgin Money in an attempt to create Britain’s sixth-largest bank, with 6 million customers.
Clydesdale and Yorkshire Bank Group (CYBG) is offering Virgin shareholders a larger stake in the combined group – 38% compared with 36.5% under the initial offer – prompting Virgin to enter into negotiations with its rival. CYBG is offering to exchange 1.2125 new shares for each Virgin Money share, up from 1.1297 shares.Clydesdale and Yorkshire Bank Group (CYBG) is offering Virgin shareholders a larger stake in the combined group – 38% compared with 36.5% under the initial offer – prompting Virgin to enter into negotiations with its rival. CYBG is offering to exchange 1.2125 new shares for each Virgin Money share, up from 1.1297 shares.
The revised offer values Virgin Money at 359p a share. CYBG’s share price had fallen in recent weeks but rose 1.4% to 296.4p on Monday morning.The revised offer values Virgin Money at 359p a share. CYBG’s share price had fallen in recent weeks but rose 1.4% to 296.4p on Monday morning.
Virgin Money said it had begun talks with CYBG because of the improvement in the terms of the proposal, and the “substantial synergy potential” and growth opportunities.Virgin Money said it had begun talks with CYBG because of the improvement in the terms of the proposal, and the “substantial synergy potential” and growth opportunities.
The boards of both banks said the proposed deal would create the UK’s first true national competitor to the large banks, with 6 million personal and business customers. They believe it would bring significant savings by removing overlap between the two firms, optimising IT spend and “rationalising” their operations. The boards of both banks said the proposed deal would create the UK’s first true national competitor to the five large banks, with 6 million personal and business customers. They believe it would bring significant savings by removing overlap between the two companies, optimising IT spending and “rationalising” their operations.
The Virgin Money founder, Richard Branson, who owns a 35% stake, could bag a large profit on the sale, seven years after he led a controversial £747m buyout of Northern Rock – later rebranded Virgin – following its rescue by the taxpayer. Virgin Money’s founder, Richard Branson, who owns a 35% stake, could make a large profit on such a sale, seven years after he led a controversial £747m buyout of Northern Rock – later rebranded Virgin – following its rescue by the taxpayer. The price paid by a consortium of investors, led by Branson, was half the amount the UK taxpayer had injected into the bank.
Share Capital analyst Gary Greenwood said he thought the offer was “somewhat lightweight”, adding that it should be thought of as a merger rather than a takeover. The Shore Capital analyst Gary Greenwood said he thought the offer was “somewhat lightweight”, adding that it should be thought of as a merger rather than a takeover.
Given that the two boards were in discussions, Greenwood said “there is goodwill on both sides of the fence for a deal to proceed”, and he expected the offer to be formalised ahead of the new deadline of 18 June. Given that the two boards were in discussions, Greenwood said there was “goodwill on both sides of the fence for a deal to proceed” and he expected the offer to be formalised before the new deadline of 18 June.
“Whether Virgin Money (and its shareholders) will press for a further sweetener remains to be seen,” he said. “The lack of an upfront cash incentive is notable and may be a source of further debate.” “Whether Virgin Money – and its shareholders – will press for a further sweetener remains to be seen,” he said. “The lack of an upfront cash incentive is notable and may be a source of further debate.”
The deal would bring together CYBG, which has 169 branches, mostly in Scotland and Yorkshire, and serves 2.8 million commercial and personal customers, with Virgin Money’s brand strong in the mortgages and credit cards business, which has 3.3 million customers.
Virgin Money was founded in 1995 as an investment business, then known as Virgin Direct, but only became a larger operation with the takeover of Northern Rock in 2011.
BankingBanking
Virgin GroupVirgin Group
Sir Richard BransonSir Richard Branson
Financial sectorFinancial sector
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