CMA Looks Into Nationwide-Virgin Money Deal

Nationwide
offered
220
pence
per
Virgin
Money
share,
comprising
218p
in
cash
and
a
2p
dividend.
Virgin
Money
shares
were
largely
unchanged
on
Friday
morning
at
213p.

Nationwide
said
that
the
deal
would
“combine
two
complementary
businesses,
creating
the
second-largest
provider
of
mortgages
and
savings
in
the
UK”
behind
Lloyds
Banking
Group
(LLOY).

Last
week,
the
requisite
number
of
Virgin
Money
shareholders
voted
in
favour
of
the
scheme,
expected
to
complete
in
the
fourth
quarter
of
2024
following
court
sanctioning.

However,
the
CMA
on
Friday
said
it
is
considering
whether
the
deal
could
result
in
a
relevant
merger
situation
and,
if
so,
whether
this
“may
be
expected
to
result
in
a
substantial
lessening
of
competition
within
any
market
or
markets
in
the
United
Kingdom
for
goods
or
services”.

The
CMA
has
informed
the
two
parties
of
the
launch
of
its
merger
inquiry,
and
will
pass
a
phase
1
decision
within
40
days
of
the
announcement.

To
assist
with
the
assessment,
the
CMA
has
invested
comments
from
any
interested
party.

Is
Nationwide
Paying
a
Fair
Price?

Morningstar
analyst
Nathan
Zaia,
in
a
note
published
on
April
30,
recommended
that
Virgin
Money
shareholders
accept
the
proposal
on
the
grounds
that
the
Nationwide
price
is
fair.

“We
maintain
our
fair
value
estimate
for
Virgin
Money
of
220p
per
share,
which
aligns
with
the
takeover
price.
Since
the
first
disclosure
of
the
intended
acquisition,
Virgin
Money’s
share
price
has
risen
35%
to
around
215p,
suggesting
the
market
thinks
the
takeover
will
likely
proceed.

T”he
offer
price
is
a
38%
premium
to
Virgin
Money’s
closing
share
price
on
March
6,
2024,
just
before
the
bid
was
announced,
and
a
40%
premium
of
the
volume-weighted
average
closing
price
for
the
three
months
leading
up
to
March
6,
2024.
The
offer
represents
a
modest
premium
to
our
stand-alone
fair
value
of
210p.

“A
superior
offer
is
unlikely.
We
believe
Nationwide
is
paying
a
fair
price
for
Virgin
Money,
and
the
board
of
directors
unanimously
recommended
shareholders
to
vote
in
favor
of
the
scheme.
So
far,
Nationwide
has
secured
irrevocable
undertakings
from
Virgin
Money’s
directors
and
shareholders,
with
a
combined
interest
of
approximately
14.9%,
to
vote
for
the
proposal.
To
become
effective,
the
scheme
requires
no
less
than
75%
shareholder
approval
and
is
not
subject
to
the
approval
of
Nationwide’s
members.”

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