Virgin Money and CYBG agree a takeover of £1.7bn, but what does this mean for investors?
CYBG seals deal for Virgin Money as challengers set to challenge together
- CYBG and Virgin Money confirm takeover deal initially announced in May
- Branson’s Virgin Money is set to be bought for £1.7bn and will give Virgin shareholders a 38% stake in the combined group
- The Share Centre maintains its ‘hold’ recommendation for Virgin Money
This morning we have had confirmation that Virgin Money has accepted the takeover offer put forward in May from CYBG. Formed out of the union between two other small banks, Clydesdale and Yorkshire Banks, the group said it had agreed with Sir Richard Branson’s Virgin Group to license the Virgin Money brand for £12m a year, rising to £15m later.
Expected to be complete in the final part of the year, the bank takeover will create Britain’s biggest challenger bank. Through the combination of its strengths, complementing Virgin Money’s well recognised brand and CYBG’s strong presence in current accounts and personal banking; the group hopes to disrupt the banking status quo.
It plans to retain the Virgin Money brand and plans to attract the younger customer who is expected to do all their banking digitally. At a time when the banking industry is undergoing significant change due to customer shifts toward digital, the group is set to have a strong digital presence and is bound to be snapping at the heels of the larger banks.
We had seen a modest but positive reaction in Virgin Money’s share price at Friday’s closing as the all-share offer values its share at 371 pence; while CYBG’s remained flat. However, Virgin Money’s progress was offset by CYBG’s poor performance and is now down.
Investors will be casting an eye over the sector potentially looking for further consolidation in the sector; the news also highlights the changing landscape within the banking sector as traditional banks disappear from the high street. Based on the unstable response in the shares and an indefinite outlook as the transition will take place over the next two to three years, it’s difficult to say that this stock is any better than a ‘hold’
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