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Virgin Money receives €1.6bn takeover offer

By John-Paul Ford Rojas, Business Reporter
Clydesdale and Yorkshire Banking Group (CYBG) has made a takeover offer for rival Virgin Money.
The all-share "preliminary approach", which values Virgin at about €1.6bn, would create a company with six million personal and business customers and create a leading challenger to Britain's biggest lenders, CYBG said.
It will add to pressure on competitor TSB - which has five million customers - after it was hit by a botched IT upgrade that left many without online banking.Shares in Virgin Money had climbed 9.8% by market close, while CYBG was up just over 1%.CYBG said in a statement confirming its offer: "CYBG believes the combination would create the UK's leading challenger bank offering both personal and SME customers a genuine alternative to the large incumbent banks."The combination would provide a powerful full-service banking offer, including leading digital and mobile banking services."The group said it represented an "attractive up-front premium" for Virgin Money shareholders, who would own 36.5% of the enlarged lender.It added that it recognised the "strength and appeal" of the Virgin Money brand and that this would play a "significant role" in the combined business subject to the agreement of Richard Branson's Virgin Group, currently a major shareholder.CYBG, which made its stock market debut in 2016 after being spun off by National Australia Bank, said there was no certainty that a formal offer would be made.
Nick Field, director at corporate finance adviser Livingstone, said: "Creating a 'challenger' bank of real scale with total assets in excess of €80 billion clearly has attractions. As both parties have relatively strong retail deposit franchises, the realisation of synergies on the asset side of the balance sheet and in operational costs will be key to drive value for shareholders in the merged group.'Duncan Chandler, Head of Financial Services at Cavendish Corporate Finance, said: "CYBG's move for Virgin Money is a smart move which should provide cost and funding synergies to both sets of shareholders as well as help CYBG access the very attractive credit card market.

"It would gain access to a significant number of current accounts and a wealth of business customers. The acquisition also provides CYBG with exposure to the highly lucrative credit card sector while also giving it more scale in the mortgage market."We expect a fresh wave of consolidation among smaller lenders to arise as economic uncertainty continues and cost pressures rise and this should be a key trend in financial services M&A over the rest of this year."
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Virgin Money, which launched in 1995, expanded with the takeover of Northern Rock in 2011.It said it was "in the process of reviewing" the proposal from CYBG.
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