- Building society surprised City by agreeing a bid for UK’s sixth largest bank
- Deal would create Britain’s second biggest savings and loans group
- Baroness Bowles: Deal looks good on paper but members should have a say
Commitment: Nationwide’s Debbie Crosbie used to work for Virgin Money
Nationwide must give members a vote on its planned takeover of Virgin Money, politicians and customers are demanding this weekend.
The building society surprised the City last week by agreeing a £2.9 billion bid for the UK’s sixth largest bank, which was founded by Sir Richard Branson.
The deal would create Britain’s second biggest savings and loans group. It would catapult Nationwide into the big league of retail banking, with almost 700 branches and £366 billion of assets.
Nationwide has snapped up a number of smaller building societies in the past, including Dunfermline, Derbyshire and Cheshire, without a member vote.
But the Virgin Money deal is easily its biggest, leading some of the mutual’s members – who own the business – to demand a vote on the outcome.
Financial services expert Baroness Bowles said the deal looked good on paper but members need more detail and should have a say.
Bowles, who sits on the board of the London Stock Exchange, said the deal could involve ‘quite a change in character for Nationwide, which would be jumping into the big bank league’.
She added there are ‘obvious benefits’ for members including more branches.
Bowles also questioned what was in it for members.
‘Are they going to be better off by being bigger?’ she asked.
Other Nationwide members have taken to social media to demand a vote on what they regard as a transformational deal.
‘This may be within the letter of Nationwide’s rules but it is very far from being in the spirt of a mutual,’ one said.
Nationwide, led by chief executive Debbie Crosbie, insists it has taken ‘extensive’ legal advice – including from an unnamed senior lawyer – that no member vote is needed under the 1985 Building Societies Act.
The society also argues that a poll would ‘tie the board’s hands’ and restrict its ability ever to buy a listed bank. It plans to write to 14 million members in the next few weeks outlining the benefits of the deal. Former Business Secretary Vince Cable said: ‘My reading is that the takeover will strengthen our biggest mutual and seems to be business sense.’
Crosbie, who is a former chief operating officer at Virgin Money and therefore knows the business well, said the combined group ‘would bring the benefits of fairer banking and mutual ownership to more people in the UK,’ including a commitment to keeping branches open when other high street players are closing theirs.
She has until April 4 either to state a firm intention to bid or to pull out.
Experts have said Virgin Money is now ‘in play’ and that rival bidders may emerge.
Nationwide may be reluctant to enter a bidding war if a third party were to enter the fray.
Branson set up Virgin Money in 1995. The bank bought Northern Rock from the Government after the 2008 financial crisis.
It was itself bought by Clydesdale and Yorkshire bank for £1.7 billion in 2018 and is now about a third of Nationwide’s size.
Virgin Money will remain a separate legal entity within Nationwide with its own board and banking licence for the ‘medium term’. The calls to give members a vote on the deal come as a Mail on Sunday analysis found that Virgin Money chief executive David Duffy could be in line for a £12 million pay-off if the current offer is accepted.
Duffy, who earned £2.7 million last year, has come under fire from Virgin Money’s shareholders over his pay and the bank’s lacklustre performance in recent years. If he were to leave as a result of a Nationwide takeover it could trigger a big pay-off under the terms of his long term bonus scheme.
