Nationwide makes £2.9bn offer for Virgin Money UK

London — Britain’s Nationwide Building Society has agreed to potentially buy lender Virgin Money UK in a deal valued at about £2.9bn ($3.69bn), the companies said on March 7. ’

The total value of 220p a Virgin Money share represents a premium of 38% as of March 6 and would be funded through Nationwide’s existing cash resources.

Nationwide, one of Britain’s largest mutually owned lenders, would remain a building society under terms of the preliminary offer, which remains subject to conditions.

The company said the merger would enable it to offer a wider range of products and services to its members and increase its financial strength.

“A combined group would bring the benefits of fairer banking and mutual ownership to more people in the UK, including our continuing commitment to retain existing branches, as part of our ‘Branch Promise’ and leading levels of customer service,” Nationwide CEO Debbie Crosbie said.

It would create a combined group with assets of about £366.3bn, with lending and advances of about £283.5bn.

Nationwide said it did not intend to make any “material changes” to the size of Virgin Money’s 7,300-strong workforce in the near term.

Virgin Money’s board said that it had carefully evaluated the deal and is minded to recommend it to shareholders.

Virgin Money is the UK’s sixth-largest retail bank by assets and has about 6.6-million customers, with total lending of £72.8bn including around £57.1bn in mortgages.

“Whilst evidencing that some smaller UK banks are currently potentially undervalued, the transaction will potentially lead to increased competition in the UK mortgage and savings market,” analysts at RBC Capital Markets said in a note.

Nationwide said it would seek to integrate Virgin Money gradually over multiple years but in the medium term Virgin Money would continue to operate as a separate legal entity with a separate board of directors and a separate banking licence.

Nationwide has the largest single-brand branch network in the UK and intends to retain a branch everywhere where the combined group is present, until at least the start of 2026.

Virgin Money’s £9bn in business-lending balances would enable Nationwide to build on its existing business savings proposition, and diversify its sources of funding, Nationwide said.

Reuters