The board of Virgin Money Holdings (UK) PLC has agreed to a roughly £1.7 billion takeover offer by CYBG PLC in a deal that will "create the U.K.'s first true national competitor to the large incumbent banks," the companies said June 18.

In line with the sweetened terms of the all-share deal, Virgin Money shareholders will get 1.2125 new CYBG shares for each Virgin Money share they hold.

Based on the June 15 closing price of 306 pence per CYBG share, the offer values each Virgin Money share at 371 pence and its ordinary shares on a fully diluted basis at approximately £1.7 billion. This represents a premium of 19% on the closing price of 312 pence per Virgin Money share on May 4 — the last business day prior to the launch of the offer — and 35% to the volume-weighted average price of 276 per Virgin Money share for the three-month period ended May 4.

Following completion of the offer, expected in the fourth quarter, Virgin Money's shareholders will own roughly 38% of the combined group, based on the issuance of 546,915,829 new CYBG shares for Virgin Money's 451,064,601 ordinary shares on a fully diluted basis.

Based on the latest financial year-end disclosures, the combined group will have £83.5 billion of total assets and a £69.5 billion total customer loan portfolio. The combination is expected to generate £120 million in annual pretax cost synergies, run rate by the end of the financial year ending Sept. 30, 2021.

CYBG also entered in to an agreement with Virgin Enterprises Ltd. for the license to continue using the Virgin Money brand for the combined group, which will be headquartered in Glasgow.

CYBG Chairman Jim Pettigrew, CEO David Duffy and CFO Ian Smith will retain their current roles in the combined group, while Virgin Money CEO Jayne-Anne Gadhia will serve as a senior adviser to Duffy in a consultancy role for an unspecified period of time beyond completion of the offer. Both parties also agreed that two nonexecutive directors of Virgin Money and one nonexecutive director nominated by Virgin Enterprises will become members of the CYBG board, subject to regulatory approvals.

Morgan Stanley & Co. International PLC is acting as financial adviser and corporate broker to CYBG, while Deutsche Bank AG serves as financial adviser and Macquarie Capital (Europe) Ltd. as corporate broker.

Goldman Sachs International is acting as lead financial adviser and corporate broker to Virgin Money, while Citigroup Global Markets Ltd. serves as financial adviser and corporate broker.