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Nationwide offers to buy Virgin Money UK in 2.9 billion pound deal
By Jerry
LONDON, March 7 (Reuters) – Nationwide Building Society (NBS.L), opens new tab has agreed to buy Virgin Money UK (VMUK.L), opens new tab in a potential 2.9 billion-pound ($3.69 billion) all-cash deal that would create Britain’s second-largest savings and mortgage provider.
The total value of 220 pence per Virgin Money share represents a premium of 38% as of March 6 and would be funded through Nationwide’s existing cash resources, Nationwide said.
The proposed deal is the latest example of a bounce in merger and acquisition activity among British lenders, some of whom are seeking to bolster their balance sheets against a possible rise in souring loans as recession bears down on UK households and businesses.
Barclays (BARC.L), opens new tab said last month it would buy the banking operations of Britain’s biggest supermarket group Tesco (TSCO.L), opens new tab for about 600 million pounds.
Analysts said the Nationwide-Virgin Money transaction could increase competition in the UK mortgage and savings market and spur a revival in some bank stocks, which have wilted in the face of geopolitical tensions and lacklustre economic growth.
The transaction might even prompt copy-cat deals among lenders keen to retain market share, others said.
“With the outlook for the UK economy stabilising, we wouldn’t be surprised to see more deals like this announced,” RBC Capital Markets analyst Benjamin Toms told Reuters.
“UK bank valuations are relatively cheap for the sustainable returns they offer.”
VIRGIN MONEY SHARES SOAR
Virgin Money shares soared by as much as 37% to their highest since February 2022. They were last up 36% at 216.10 pence.
Nationwide, one of Britain’s largest mutually-owned lenders, itself a product of several takeovers and mergers, would remain a building society under terms of the preliminary offer, which remains subject to conditions.
