Virgin Money has agreed to be taken over by Nationwide Building Society in a deal worth £2.9bn, the lenders have announced.
Nationwide said the merger would allow the company to provide members with a wider range of products and services.
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Virgin Money has agreed to be taken over by Nationwide Building Society in a deal worth £2.9bn Credit: Rex Features
Virgin Money has around 6.6 million customers in the UK and 91 branches, while Nationwide has 16 million members and 686 branches.
It is the biggest deal the bank has ever done after Nationwide chief executive Debbie Crosbie announced the planned acquisition this morning.
It is important to note that there are no immediate changes for customers.
Although details are yet to be finalised, the deal would see the two brands operate as separate entities, with the Virgin Money brand retained for six years before rebranding as Nationwide.
No announcement of branch closures is expected.
Nationwide has also confirmed that there will be no changes to deposits and that savings up to £85,000 will remain protected by the Financial Services Compensation Scheme (FSCS).
In addition, the bank continues with its “Branch Promise” by keeping all its branches open at least until the beginning of 2026.
If the takeover goes ahead, it would create the second largest mortgage and savings group in the country.
Nationwide would overtake Natwest, putting them just behind Lloyds as the group’s biggest lender.
Each sale will be closely monitored by the banking regulator.
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David Hollingworth, associate director at L&C Mortgages, said a potential combination would create “another Goliath” that would enhance Nationwide’s ability to take on large banking groups.
He added: “Borrowers have nothing to worry about and their mortgage will continue as usual.
“In fact, both brands are set for some time to come, so the market should continue to benefit from differentiated ranges in the near term.”
Both parties confirmed that the deal is mutual and will be financed from existing financial sources.
Nationwide said it did not intend to make any material changes to the size of Virgin Money’s workforce “in the near future”.
Virgin Money employs around 7,300 people.
Nationwide was presented with a cash offer of 220p per Virgin Money share last Wednesday, representing a 30% premium to Virgin Money’s share price.
The companies added a planned dividend payment of 2p which would come on top of the original payout.
The companies would have an estimated amount of loans and advances of around £283.5bn, and together the group would have total assets of £366bn.
Nationwide chief executive Debbie Crosbie said: “Nationwide will remain a building society and the combined group would bring the benefits of fairer banking and shared ownership to more people in the UK, including our continued commitment to retaining existing branches, as part of our ‘Branch Promise’ and superior levels of customer service.
“We believe the combination would create a stronger and more diversified business that will be better positioned to deliver value to our members and customers, both now and in the future.”
Virgin Money chief executive 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 offering to clients and complete our journey in the banking sector as a national competitor.”
VIRGIN HISTORY
The Virgin Money brand was founded by Richard Brandon in March 1995.
Originally known as Virgin Direct, the bank expanded its operations worldwide in the early 2000s with the hope of removing ‘financial jargon, red tape’ and making banking an overall ‘more enjoyable experience’ according to its founder.
In a statement on Virgin Money’s website, Richard explained: “It was an opportunity to change a stagnant industry and give customers much-needed competition.”
RECENT ACQUISITIONS
Just last month we saw a similar deal between Barclays and Tesco Bank.
Tesco Bank, which has more than five million customers, has been sold to Barclays in an agreed deal that would include the takeover of almost 3,000 employees.
It comes after Sainsbury’s announced it would close its banking division – known as Sainsbury’s Bank – as part of plans to focus on retail.
Last summer Sainsbury’s Bank transferred its £479m mortgage book to the Co-op Bank.
On the other hand, ailing Metro bank announced 800 job cuts and revised working hours in a new attempt to cut costs.
The central bank is considering reducing its branch office hours to seven days as it tries to recover costs.
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