Sir Richard Branson is in line for a £420million plus windfall thanks to Nationwide’s £2.9billion deal to buy challenger bank Virgin Money.
The entrepreneur’s Virgin Group owns 14 percent of the London Stock Exchange-listed bank and the Nationwide deal is the second big windfall Branson will receive from Virgin Money, which he used to swoop on Northern Rock in 2011.
The challenger bank and its partners paid £747million to acquire Northern Rock from the Government, a deal that left Branson with 34.8 percent of the combined business. Virgin Money was then sold to Clydesdale & Yorkshire Bank for £1.7billion in 2018. Branson retained shares in the combined business, which was rechristened as Virgin Money the following year.
Nationwide, the UK’s largest mutual financial services group, says that acquiring Virgin Money, the sixth biggest retail bank, would create a bigger, stronger rival to the big high street banks. It said that it would also give it the financial resources to offer more competitive rates for mortgages and savings.
Chief executive Denise Crosby added: “Importantly, Nationwide will remain a building society, and a combined group would bring the benefits of fairer banking and mutual ownership to more people in the UK, including our continuing commitment to retain existing branches.”
Outside of ones that have already been approved by Virgin Money for closure or are already in the process of being closed, Crosby said that the challenger bank’s existing network of 91 stores will be included in Nationwide’s commitment to keep a branch in every area the combined business currently operates.
She added that Nationwide does not intend to make any “material changes” to Virgin Money’s approximately 7,300 staff in the near term.
Nationwide’s offer, which is backed by Virgin Money’s board, would see shareholders receive 218p per share and a 2p per share dividend. The offer values Virgin Money at a 38 percent premium.
Russ Mould, broker AJ Bell’s investment director, said that the mutual had struck at an opportune time. “Nationwide is effectively pouncing on Virgin Money at a time when prospects are improving for its industry,” he said.
“This is slightly unusual as companies often buy rivals at precisely the wrong time – namely acquiring at the top of the market when everything looks good and then overpaying for deals, rather than taking bold steps and acquiring when everything looks bad and valuations are weak.”
