The proposed acquisition, which is expected to create the UK’s second-largest savings and mortgage provider, would allow Nationwide to enter business banking, after its failed attempt during the pandemic, and expand its presence in the mortgage market
Nationwide to acquire Virgin Money. (Credit: Virgin Money UK)
UK-based mutual financial institution Nationwide Building Society has agreed to acquire financial services company Virgin Money for £2.9bn.
Under the terms of the deal, Virgin Money shareholders will receive 220 pence per share, which indicates a 38% premium to the last closing price of Virgin Money shares, on 6 March 2024.
Nationwide intends to fund the acquisition through its existing cash resources.
The acquisition would allow Nationwide to enter business banking, after its failed attempt during the pandemic, and expand its presence in the mortgage market.
With assets of valuing around £366bn, the combined group is anticipated to become the UK’s second-largest savings and mortgage provider.
Nationwide Building Society chairman Kevin Parry said: “A combination with Virgin Money would accelerate Nationwide’s strategy and create a stronger, and more diverse, modern mutual.
“The combination would increase Nationwide’s scale and financial strength, put us in a stronger position to continue to provide Fairer Share Payments to eligible Nationwide members, and offer rates for mortgages and savings that are, on average, better than the market average.”
Nationwide Building Society CEO Debbie Crosbie said: “We believe the combination would create a stronger and more diverse business that will be better placed to deliver value to our members and customers, both now and in the future.”
Currently, Virgin Money is the sixth largest retail bank in the UK, with around 6.6 million customers, and Nationwide is the biggest building society with nearly 18 million customers.
Virgin Money has reported a decreased pre-tax profit of £345mn for the 12 months ended of September 2023, after the company faced a large-scale provision for bad loans.
The company’s recent years’ performance has also been affected by compensation payouts related to mis-sold payment protection insurance.
The UK lender said that it will not make any material changes to the current structure of Virgin Money’s workforce, which includes about 7,300 people, in the near term.
Virgin Money would initially continue operations as a separate business unit within Nationwide and would be integrated and the brand retired over the next six years.
Virgin Money UK chairman David Bennett said: “We are confident that a combination would support an exciting new chapter for Virgin Money to benefit from Nationwide’s scale and ambition.”
Virgin Money UK CEO 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.”