Nationwide Building Society to acquire Virgin Money UK PLC for £2.9bn

In a landmark development for the UK financial services sector, Nationwide Building Society (“Nationwide”) and Virgin Money UK PLC (“Virgin Money”) have announced a definitive agreement under which Nationwide will acquire the entire issued and to be issued share capital of Virgin Money. The cash transaction is valued at approximately £2.9 billion, reflecting a significant premium of around 38% over Virgin Money’s closing share price on March 6, 2024, and about 40% over the three-month volume-weighted average price.

This strategic acquisition is poised to merge two highly complementary businesses, positioning the combined entity as the UK’s second-largest provider of mortgages and savings. Nationwide, the UK’s largest building society, is committed to enhancing its services and offerings through this acquisition, enabling it to expedite its strategic objectives more effectively than organic growth would allow.

Under the terms of the acquisition, Virgin Money shareholders are entitled to receive 220 pence per share, combining 218 pence in cash consideration and a proposed dividend of 2 pence per share. This deal not only underscores the value attributed to Virgin Money’s current market position and future prospects but also highlights the financial strength and strategic vision of Nationwide.

The Boards of Nationwide and Virgin Money believe that this acquisition will create a stronger financial services group with enhanced product offerings and service capabilities. Nationwide aims to leverage this merger to provide its members and customers with superior value through better-than-market mortgage and savings rates, among other benefits.

A significant aspect of this acquisition involves the planned re-branding of the Virgin Money business, aligning with Nationwide’s long-term integration strategy. Nationwide has entered into agreements with Virgin Enterprises and Virgin Red, signaling a potential partnership expansion of the “Virgin Red” loyalty programme post-acquisition.

Furthermore, the acquisition is subject to approval from Virgin Money shareholders, including passing a crucial resolution related to the amendments in the brand licensing agreement and exclusivity agreement with Virgin Enterprises and Virgin Red.

Kevin Parry, Chairman of Nationwide Building Society, expressed that the acquisition aligns with the best interests of Nationwide’s members, enhancing the society’s position in the financial services market. Debbie Crosbie, CEO of Nationwide, highlighted the acquisition’s role in broadening the society’s service offerings and reinforcing the mutual ownership model’s benefits.

On the Virgin Money side, Chairman David Bennett and CEO David Duffy lauded the transaction for recognizing Virgin Money’s value and growth prospects, emphasizing the strategic fit and potential of the combined entity to offer more comprehensive financial solutions to a broader customer base.

The acquisition of Virgin Money by Nationwide Building Society represents a pivotal moment in the UK’s banking and financial services industry. It reflects the strategic moves by established players to consolidate their market positions while expanding their service portfolios. This merger not only enhances Nationwide’s competitive edge but also signals a significant shift towards more integrated financial services offerings, potentially setting a precedent for future consolidations in the sector.