Virgin Money in talks with Clydesdale and Yorkshire bank owners with £4bn deal

Over the weekend, Virgin Money has been in talks about an all-share offer to create a £4bn challenger lender with the owner of its Clydesdale and Yorkshire banks.

Recently, CYBG has tabled a revised bid which values Virgin Money at about £1.7bn.

The new approach - which comes ahead of a deadline this evening (June 4) - will surprise expectations that CYBG chief executive, David Duffy would make his original proposal ‘exciting’ with a cash element.

A combination of the two companies would create a personal and SME banking group with six million customers and a £70bn balance sheet - said to be further ahead than any of Britain’s other challenger banks.

It would also enable CYBG’s technology platform to be rolled out across Virgin Money’s product base - even as it continues to build its own digital banking capabilities through a partnership with a company founded the former Barclays chief, Antony Jenkins.

The new approach is said to have increased the proportion to be owned by Virgin Money shareholders to around 40 per cent.

One issue, which remained unresolved over the weekend, relates to the use of the Virgin name in a combined group.

Speaking to Sky News, CYBG has said it would “ensure that the Virgin Money brand would play a significant role” if a takeover is in action, with one insider saying that the parent company was “highly likely” to use Sir Richard Branson’s brand.

Among the options being negotiated between the two boards is for the Virgin Money name to replace a substantial proportion of the retail banking products currently offered under the Clydesdale and Yorkshire brands, the insider added.

Sir Richard’s Virgin Group holds a 30 per cent stake in Virgin Money, which bulked up after the financial crisis by buying the retail operations of Northern Rock in a £750m deal.

Virgin Money, OneSavings Bank and the Nationwide building society have all been growing their market share, but in retail and small business banking remain heavily concentrated among the major players.

Among the challengers, TSB has been hit by a crisis over its migration to a new technology platform, while the Co-op Bank continues to recover from 2017’s struggles.

At the close on Friday (June 1), CYBG had a market value of nearly £2.6bn, while Virgin Money was worth £1.53bn.

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