CYBG takeover bid for Virgin Money

FINANCE: Move by Clydesdale owner values challenger bank at £1.6 billion

Virgin Money shares surged after CYBG tentatively tabled a takeover offer that values the challenger bank at £1.6 billion and stands to deliver a major payout for Richard Branson’s Virgin Group.

Both lenders have now confirmed CYBG, owner of the Clydesdale Bank, made a preliminary and conditional offer for the bank on Monday evening.

The offer comprises 1.1297 new CYBG shares for each Virgin Money share, effectively valuing each stock at 359p.

CYBG said the combination would create the “UK’s leading challenger bank offering both personal and SME customers a genuine alternative to the large incumbent banks.”

It added: “With this further strengthened customer franchise and national reach, CYBG believes the combination would deliver increased value for shareholders and wider benefits to other stakeholders.

CYBG assured the Virgin Money brand would “play a significant role in the combined group,” with takeover target’s Virgin Money shareholders set to own around 36.5% of the new business.

The bid sent shares in Virgin Money Holdings 8% higher in morning trading, while CYBG shares also moved ahead.

The deal could mean a major payout for founder Sir Richard Branson, whose Virgin Group holds a controlling stake in the lender. A formal offer must be tabled no later than 5pm on June 4.

Gary Greenwood, an analyst at Shore Capital Markets, said the combination would bring together CYBG’s SME banking capabilities and branch network with Virgin Money’s “better brand” and strong intermediary mortgage franchise.

However, he warned there are likely to be practical and regulatory hurdles to any tie-up.

Dundonian Jim Pettigrew is chairman of the board of CYBG.