UPDATE 2 — Edinburgh and Newcastle-based challenger bank Virgin Money Holdings (UK) Plc said on Monday it received a preliminary and conditional all-share takeover offer from CYBG Plc, owner of Clydesdale Bank and Yorkshire Bank, that would value Virgin Money at roughly £1.6 billion.
Virgin Money’s board is still reviewing the proposed deal, in which Virgin Money investors would receive 1.13 shares of CYBG for each Virgin Money share they own.
At the banks’ most recent share prices, that would value Virgin Money shares at 359p, a roughly 15% premium, according to Bloomberg.
“Shareholders are advised to take no action in relation to this proposal,” Virgin Money said a statement, which it said it released without the consent of CYBG.
“There can be no certainty either that an offer will be made nor as to the terms of any offer, if made.”
CYBG later said in a statement: “CYBG plc notes the announcement made by Virgin Money and confirms that it has today made a preliminary approach regarding a potential all share combination of CYBG and Virgin Money.
“Under the terms of the proposal, CYBG would acquire all the issued and to be issued ordinary share capital of Virgin Money on the basis of an exchange ratio of 1.1297 new CYBG shares for each Virgin Money share.
“Under the terms of the proposal, Virgin Money shareholders would own approximately 36.5% of the combined group.
“The proposal provides the Virgin Money shareholders with an attractive up-front premium and the opportunity to participate in the continuing progress of the combined group, including sharing in the opportunity for value creation from the substantial synergy potential resulting from the combination.
“CYBG recognises the strength and appeal of the Virgin Money brand.
“Our proposal would ensure that the Virgin Money brand would play a significant role in the combined group, subject to reaching agreement with Virgin Group Holdings Limited.
“CYBG believes the combination would create the UK’s leading challenger bank offering both personal and SME customers a genuine alternative to the large incumbent banks.
“The combination would provide a powerful full-service banking offer, including leading digital and mobile banking services, for 6 million personal and business customers, bringing together the complementary strengths of CYBG and Virgin Money.
“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.
“Further announcements will be made in due course as appropriate, but there can be no certainty that a formal offer will be made.
“The board will only proceed with a transaction if it is in line with CYBG’s strategic objectives and is in the best interests of CYBG shareholders.
“In accordance with Rule 2.6(a) of the Code, by not later than 5.00 p.m. on 04 June 2018, CYBG will be required to either announce a firm intention to make an offer for Virgin Money in accordance with Rule 2.7 of the Code or announce that it does not intend to make an offer, in which case such announcement will be treated as a statement to which Rule 2.8 of the Code applies.
“This deadline will only be extended with the consent of the UK Takeover Panel in accordance with Rule 2.6(c) of the Code.”