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CYBG sweetens offer for Virgin Money

CYBG PLC sweetened its offer for Virgin Money Holdings (UK) PLC, raising the stake that Virgin Money's shareholders will own in the combined group to roughly 38% from 36.5% in the previous offer.

Under the revised proposal, CYBG will acquire Virgin Money's entire issued and to-be-issued ordinary share capital based on an exchange ratio of 1.2125 new CYBG shares for each Virgin Money share, up from a ratio of 1.1297 to 1.

Based on CYBG's June 1 closing stock price of £2.9180 and Virgin Money's 442,573,550 outstanding shares, the revised offer values Virgin Money at approximately £1.60 billion, down from the initial proposal as CYBG has seen its share price fall by roughly 9% since May 8.

Virgin Money shareholders will also be entitled to retain a dividend of up to 2.3 pence per share for the interim period ending June 30, should the bank declare and pay such a dividend.

The deadline for a formal offer was also extended to June 18 to enable ongoing diligence and discussions, the two companies said June 3.

CYBG noted that it reserves the right to make an offer on reduced terms at any time with the agreement or recommendation of Virgin Money's board of directors; should a third party make a firm offer for Virgin Money at a price lower than CYBG's bid; if Virgin Money pays any dividend or other distribution to its shareholders; or if Virgin Money announces a whitewash transaction, among other things. CYBG also reserves the right to introduce other forms of consideration and/or change the composition of any offer's consideration.

CYBG said separate talks and due diligence are also ongoing between the bank and Virgin Enterprises Ltd for the license to use the Virgin Money brand for the combined group.

Both banks said they expect cost savings from removing duplication, optimizing IT spending, rationalizing operations and boosting efficiencies in central procurement and third-party outsourcing costs, in addition to revenue synergies from an enhanced customer base and product range and funding synergies.

A merger between CYBG and Virgin Money would create the sixth-largest lender in the U.K., the Financial Times noted.