NAB spin-off CYBG lifts offer for Richard Branson-founded Virgin Money

NAB offshoot CYBG has upped its all-scrip offer for Virgin Money, as it eyes building Britain’s ‘leading challenger bank’.

NAB offshoot Clydesdale has lifted its all-share takeover offer for Richard Branson-founded Virgin Money. Picture: Bloomberg

NAB offshoot Clydesdale has lifted its all-share takeover offer for Richard Branson-founded Virgin Money as it presses on with a plan to create a national competitor in UK banking.

The dual listed CYBG (CYB), which operates Clydesdale Bank and Yorkshire Bank, said today it would offer an exchange ratio of 1.2125 new shares for each Virgin Monday share, up 7 per cent from the 1.1297 shares proposed in May.

The new offer came hours ahead of a Takeover Panel deadline, which has now been extended until June 18, at which date CYBG will be required to either announce a firm intention to make an offer.

If the bid is successful, Virgin Money shareholders would own about 38 per cent of the newly combined company, Clydesdale said today.

Discussions are ongoing and reciprocal due diligence is being conducted, the company said today.

Success is likely to depend on the attitude of Virgin Money’s biggest shareholder, Sir Richard, who controls almost 35 per cent of the company through Virgin Group Holdings.

“The boards of CYBG and Virgin Money believe that the proposed combination would create the UK’s first true national banking competitor, offering both personal and SME customers an enhanced alternative to the large incumbent banks,” Clydesdale said in a statement to the ASX this morning.

The merger would mean the banks would provide a full-service banking offering to about six million customers.

“With this further strengthened customer franchise and national reach, the boards of Clydesdale and Virgin Money believe the proposed combination would deliver increased value for shareholders and wider benefits to other stakeholders,” the statement said.

Clydesdale is listed on the Australia and the London stock exchanges and was spun off from NAB in 2016 following a string of lending scandals.

Cost savings would arise from “removing duplication”, as-well-as optimising IT spend, rationalising operations and increasing efficiencies in central procurement and third party outsourcing costs.

It is not clear whether the merged company would remain listed on the ASX, with about 60 per cent of Clydesdale’s existing register believed to be based here.

It comes after the company booked a statutory loss attributable to equity holders of £76 million ($134m) for the six months to 31 March, compared to a statutory net profit of £30m for the same period a year prior on the back of legacy conduct costs associated with payment protection insurance.

CYBG shares closed 6 per cent higher at $5.30.