Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Nationwide Building Society has reached a preliminary agreement to buy Virgin Money in a £2.9bn deal that would bolster its ability to challenge the UK’s big four banks.
Nationwide is offering a total of 220p for each Virgin Money share, including a 2p final dividend, marking a 38 per cent premium to the bank’s closing share price on Wednesday.
If a deal is finalised, Nationwide said the combined group would have total assets of about £366bn and create the second-largest provider of mortgages and savings in the UK. The purchase would also mark a rare acquisition of a listed company by a mutual.
Nationwide said on Thursday that the transaction would allow it to “accelerate its strategy and broaden and deepen its products and services faster than could be achieved organically”.
It added that the acquisition would give it “access to greater diversity of funding, notably from business deposits”.
Virgin Money would continue to operate as a separate business within Nationwide initially, although eventually it would be integrated and the brand would be retired over the next six years.
The building society added that it did not plan to “make any material changes to the size of the Virgin Money employee base in the near term”. Virgin Money employs about 7,300 people.
The Virgin Money board said that it would be “minded” to recommend a firm offer if one was made. The Virgin group, which owns 14.5 per cent of Virgin Money shares, has also indicated that it would support a deal that would allow it “to benefit from Nationwide’s scale and pace of investment”.
Virgin Money has struggled over the past 12 months. It was hit with rising credit card arrears due to the cost of living crisis, leading it to miss profit expectations in November.
The companies cautioned that there was no certainty that a firm offer would be made.