Nationwide to Buy Virgin Money for £2.9 Billion

Virgin
Money
said
should
a
firm
offer
be
made
on
the
same
financial
terms
it
would
be
“minded
to
recommend”
it
to
shareholders.
It
has
the
support
of
the
brand
owner
Virgin
Group.

Virgin
Money
pointed
out
there
had
been
a
series
of
proposals
from
Nationwide.

The
owner
of
Clydesdale
Bank,
Yorkshire
Bank
and
Virgin
Money
noted
the
offer
represented
a
premium
of
38%
to
its
closing
share
price
on
Wednesday
of
159.05p.

Shares
in
Virgin
Money
rose
36%
to
216.31p
in
early
exchanges
in
London
on
Thursday.
Nationwide
is
not
listed
on
the
stock
market.

Key
Morningstar
Metrics
for
Virgin
Money

Fair
Value
Estimate:
210p
Morningstar
Rating:
★★★
Morningstar
Economic
Moat
Rating:
None
Morningstar
Uncertainty
Rating:
High

Chief
Executive
of
Virgin
Money
David
Duffy
said:
“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.”

Gary
Greenwood,
banking
analyst
at
Shore
Capital,
felt
“long
suffering
shareholders
are
likely
to
welcome
this
offer,
especially
given
its
cash
nature,
but
we
feel
it
undervalues
the
group
and
that
management
could
have
perhaps
driven
a
harder
bargain”.

“We
see
the
likelihood
of
a
counter
offer
as
being
very
low,”
he
added.

Virgin
Money
Deal
to
Broaden
Nationwide
Services

The
combined
group
would
have
total
assets
of
around
£366.3
billion
and
total
lending
and
advances
of
around
£283.5
billion,
the
two
companies
said
in
a
statement.

Swindon-based
Nationwide
said
it
remained
wholly
committed
to
being
a
building
society
and
a
modern
mutual.

The
deal
would
enable
it
to
accelerate
its
strategy
and
broaden
and
deepen
its
products
and
services
faster
than
could
be
achieved
organically,
Nationwide
said.

“The
deal
looks
to
make
a
lot
of
strategic
sense
for
Nationwide
in
terms
of
extension
into
cards
and
business
current
accounts
+
scale
in
core
lending
and
deposits,”
say
analysts
at
Jefferies.

The
acquisition
will
enable
Nationwide
to
increase
its
scale
in
its
core
lending
and
deposit
markets
and
strengthen
its
position
as
one
of
the
UK’s
leading
providers
of
mortgages,
savings
and
current
accounts,
Nationwide
added.

Nationwide
said
the
integration
would
take
place
over
“multiple”
years
and
pledged
to
retain
a
branch
everywhere
where
the
combined
group
is
present,
until
at
least
the
start
of
2026.

The
building
society
said
it
will
not
make
any
“material
changes”
to
the
size
of
the
Virgin
Money
employee
base
in
the
near
term.

Virgin
Money
licenses
certain
rights
to
use
the
‘Virgin
Money’
brand
from
Virgin
Enterprises
through
to
a
trademark
licence
agreement.

Nationwide
said
the
TMLA
would
be
terminated
on
the
fourth
anniversary
of
completion
of
the
deal
and
Virgin
Money
re-branded
over
time.

Nationwide
and
Virgin
Enterprises
are
exploring
options
for
a
potential
partnership
relating
to
the
expansion
of
the
Virgin
Red
loyalty
programme
to
customers
of
the
combined
group,
Nationwide
stated.

Virgin
Group
Holdings
Ltd,
which
holds
a
14.5%
interest
in
Virgin
Money,
said
it
would
support
a
deal
on
the
same
financial
terms.

Virgin
Money
said
it
has
suspended
its
share
buyback
programme
with
immediate
effect,
amid
the
takeover
offer.

UK
Market
Open
–
Stocks
on
the
Move

Elsewhere,
FTSE
100
opened
down
0.3%
while
the
FTSE
250
was
up
0.2%
following
the
release
of

the
chancellor’s
Budget
and
ahead
of

an
interest
rate
decision
from
the
European
Central
Bank.

Multiple
companies
reported
earnings
on
Thursday
morning.
FactSet
data
shows
that
Rentokil
(RTO)
is
so
far
up
almost
13%
after
releasing
its
2023
earnings,
reporting
year-over-year
growth
in
profit
and
revenue.
Spirax-Sarco
Engineering
(SPX)
also
reported
full-year
results
and
revenue
growth,
and
the
stock
is
up
7%.
And,
Aviva
(AV.)
is
up
almost
4%
on
the
news
of
increased
operating
profits
and
a
share
buyback
programme
worth
£300
million.

At
the
other
end
of
the
spectrum,
Entain
(ENT)
is
down
almost
6%.
The
company
grew
its
revenue
but
reported
losses
for
the
full-year
2023.
Finally,
Melrose
Industries’
(MRO)
losses
widened,
but
also
here,
revenue
grew
year-over-year.
The
stock
is
down
4%.

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