CYBG sweetens deal for Virgin Money shareholders

According to reports, and newly improved offer would see Virgin Money shareholders own 38 per cent of the new merged business instead of the previously quoted 36 per cent.

CYBG, which also includes Yorkshire Bank, said a deal would create “the UK’s first true national banking competitor” as an alternative to the incumbent banks.

CYBG’s initial bid, made last month, offered 1.1297 of its shares for each Virgin Money share, giving Virgin Money shareholders about 36 per cent of the new merged business.

However, the revised bid ups that to 1.2125 shares, giving Virgin Money shareholders about 38 per cent of the combined group.

Sir Richard Branson’s Virgin Group is currently Virgin Money’s biggest shareholder with a 34.8 per cent stake in the business.

If accepted, the deal would create the UK’s fifth largest bank with six million personal and business customers and a balance sheet of £70bn.

CYBG has said it will keep the Virgin Money brand, subject to an agreement with Richard Branson’s Virgin Group.

Alasdair Ronald, Senior Investment Manager at Brewin Dolphin Glasgow, said: “Providing CYBG does not overpay for Virgin Money, this move should be good for the group in the long term and would create a new competitor to Britain’s biggest banks. There is value in challenger banks at present and an increasing interest rate environment should be good for profitability. However, it’s important to note that, while it seems reasonable to expect the discussions with Virgin Money to prove successful, the revised terms announced by CYBG shouldn’t yet be taken as a firm offer. CYBG has two weeks from today to make a firm offer and it’s believed that the revised terms will be enough to win control.”

CYBG said discussions were “ongoing” regarding other terms and conditions and that the announcement of the revised bid did not constitute a firm intention to make an offer for Virgin Money.

CYBG now has until 17:00 on 18 June to make a firm offer or walk away from Virgin, under rules set down by Britain’s Takeover Panel.

Virgin Money, which was founded in 1995, expanded its business in 2011 when it bought the remnants of Northern Rock for about £747m.