Nationwide, the UK’s largest building society, has reached a preliminary agreement for a potential cash acquisition of Virgin Money for approximately £2.9 billion.
According to the boards of both Nationwide and Virgin Money, the potential acquisition would combine two “complementary” businesses, creating a merged group with total assets of £366.3 billion and total lending and advances of approximately £283.5 billion, making it the second largest provider of mortgages and savings in the UK.
For the building society, the acquisition would help accelerate its existing strategy and “broaden and deepen” its products and services faster than it could organically, it said.
As part of its acquisition plan, Nationwide said it would integrate Virgin Money gradually over multiple years and that Virgin Money would operate as a separate legal entity within Nationwide over the medium term. The building society added that it plans to continue using the Virgin Money brand for the next six years, after which, it will rebrand the business. In terms of employees, Nationwide assured it does not intend to make any “material changes” to Virgin Money’s 7,300-strong workforce.
“The combination of our businesses would put us in a stronger position to continue to provide Fairer Share Payments to our eligible Nationwide members, better value mortgages and savings, and leading customer service,” Nationwide chairman Kevin Parry wrote on its website. “Over time, we would aim to provide a wider range of products and services to our customers and members, including Virgin Money’s well-established business banking services.”
Virgin Money’s board has said that it has “carefully evaluated” the potential offer with financial advisors and has concluded that if a firm offer is made on the same financial terms, it would recommend the offer to its shareholders.
David Duffy, CEO of Virgin Money UK, said the potential transaction would help Virgin Money “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.”
Nationwide will have to make a decision on whether it intends to go ahead with a firm offer or not by 4 April 2024.
