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Nationwide Building Society has announced a £2.9bn deal to acquire Virgin Money, two weeks after the companies agreed the initial terms of a tie-up designed to challenge the dominance of Britain’s biggest banks.
The purchase, which is set to catapult Nationwide into business banking and increase its share of the mortgage and savings market, is Debbie Crosbie’s boldest move since taking over as chief executive of the mutual in 2022.
Under the terms of the transaction, Nationwide will pay 218p in cash for each share of Virgin Money and a final dividend of 2p, the companies said on Thursday.
Nationwide, which has 18,000 employees, said the combined group would have assets of about £366bn and become the second-largest provider of mortgages and savings in the UK. Nationwide also confirmed it would eventually phase out the Virgin Money brand.
Co-founded as Virgin Direct by Jayne-Anne Gadhia in 1995, Virgin Money was bought by Clydesdale & Yorkshire Banking Group for £1.7bn in 2018 in a deal that kept the Virgin brand. Its sale will benefit Sir Richard Branson, the owner of the Virgin Group, which owns a 14 per cent stake in Virgin Money set to be worth more than £400mn.
Virgin Money will also pay a £250mn exit fee to the Virgin group to cease using its branding, and £15mn in annual fees while it continues to do so.
“This acquisition strengthens Nationwide and means we can offer more value and broader services for our current and future members,” Crosbie said in a statement.
The acquisition price is a 38 per cent premium to Virgin Money’s closing share price on March 6, the day before the outline of the deal was announced.
Virgin Money has struggled over the past 12 months and last year increased its provision for bad loans. In recent years, its performance has been blighted by higher than expected compensation payouts linked to mis-sold payment protection insurance.
David Duffy, chief executive of Virgin Money, said: “The proposed combination with Nationwide presents an exciting opportunity to build on Virgin Money’s significant strategic and operational progress.”
Duffy, an Irish banker who has led Virgin Money since its previous merger in 2018, will retire and be replaced by Nationwide’s finance chief Chris Rhodes, the statement said.
Crosbie and Duffy have worked together previously. When Duffy joined as head of CYBG in 2015, Crosbie was chief operating officer, a role she held for four years until she left to run TSB Bank.
As part of the announcement, Nationwide extended its commitment to keep a branch open in every location it is present in until at least the start of 2028, and said the pledge would also account for Virgin Money’s real estate.
Nationwide said it would make “limited workforce changes” to reduce “the size of overlapping central functions” linked to Virgin Money’s delisting. However, the building society said it would not make “material changes” to Virgin Money’s staff count in the first year after completion.
