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LONDON (Alliance News) - CYBG PLC said Monday it has reached an agreement with Virgin Money Holdings PLC for an all-share takeover, which aims to create "UK's first true national banking competitor to the status quo".
The owner of Clydesdale & Yorskhire Bank said the merger with its fellow mid-cap lender will see shareholders receive 1.2125 new CYBG shares for each Virgin share, valuing each Virgin Money share at 371 pence. The offer values all of Virgin Money at GBP1.70 billion, giving the combined firm a value of about GBP4.40 billion.
Virgin Money shares were trading up 1.9% at market open on Monday at 361.00p, while CYBG shares were trading up 0.1% at 306.40p.
The offer price represents a 19% premium to the closing price of 312p per Virgin Money share on May 4, the last business day prior to the start of the CYBG offer. Virgin shares closed at 355p on Friday.
Following the merger, Virgin Money shareholders will own 38% of the group. CYBG said Richard Branson's Virgin Holdings, which has a 34.8% stake in Virgin Money, supports the offer.
"The combination of CYBG and Virgin Money will create the first true national competitor to the status quo in UK banking, offering a genuine alternative for consumers and small businesses," CYBG Chief Executive David Duffy said.
"By combining two of the UK's leading challenger banks, we will create a national, full-service bank with the capabilities needed to compete effectively with the large incumbent banks. We are bringing together CYBG's 175-year heritage in serving retail and SME customers and advanced digital technology, with the iconic Virgin Money brand and consumer champion credentials."
CYBG said it has agreed with Virgin Enterprises Ltd an exclusive, perpetual licence for it to use the Virgin Money brand. It will pay a minimum royalty of GBP12 million to GBP15 million per year for the rights. There will be an additional yearly royalty based the CYBG group revenue.
"The CYBG directors believe that the use of Virgin Money's iconic national brand combined with CYBG's customer-centric propositions will drive further growth opportunities for the combined group," CYBG said.
Following completion of the offer, CYBG Chairman Jim Pettigrew, CEO Duffy and Chief Financial Officer Ian Smith will lead the combined group, with Virgin Money CEO Jayne-Anne Gadhia acting as a consultant for the period after the takeover.
Two of Virgin Money's non-executive directors, as well as one non-executive director nominated by Virgin Enterprises will become members of the CYBG board.
The final deal reached represents an increase of the preliminary offer price which, on May 8, valued Virgin Money at GBP1.60 billion, offering 1.1297 new CYBG shares per Virgin Money share.
On June 4, CYBG increased its offer to 1.2125 CYBG shares per Virgin Money share, which became the final agreed price announced on Monday.
Virgin Money is part of Richard Branson's Virgin Group Ltd and was founded in 1995 under the name Virgin Direct.
In January 2012 it rebranded after buying failed lender Northern Rock PLC which had been government-owned since 2008 as an alternative to insolvency.
"The offer reflects confidence in our strategy, our track record of delivery and the complementary strengths of the two businesses," Virgin Money Chief Executive Gadhia said.
"The combination of Virgin Money with CYBG will have greater scale to challenge the big banks. It will also accelerate the delivery of our strategic objectives, particularly the expansion of the products we offer to customers."
