CYBG makes takeover approach for challenger bank Virgin Money | City A.M.

The owner of Clydesdale and Yorkshire Bank CYBG has swooped in with a preliminary approach for a full-share takeover of Virgin Money, valuing the challenger at £1.6bn.

CYBG said that the merger, if it goes through, would create a “genuine alternative” to the UK’s biggest banks.

Both parties confirmed the news on Monday night. The offer would see Virgin Money shareholders receive 1.1297 new CYBG shares for each Virgin share.

The board of Virgin Money will now review the proposal, though the company said there was “no certainty” that an offer will be made.

Under UK takeover rules, CYBG must now make a firm offer or retract its interest by 4 June 2018.

The offer follows Virgin Money boss Jayne-Anne Gadhia presiding over strong first-quarter results at the start of May, boasting good credit sales and a 0.5 per cent mortgage growth.

Virgin Money shareholders were told to take no action, as they now await a further announcement which will be made in due course.

In a statement issued by CYBG, the bank explained that Virgin Money shareholders would own around 36.5 per cent of the combined group under its proposals.

“The proposal provides the Virgin Money shareholders with an attractive up-front premium and the opportunity to participate in the continued progress of the combined group, including sharing in the opportunity for value creation from the substantial synergy potential resulting from the combination,” CYBG said.

“CYBG recognises the strength and appeal of the Virgin Money brand. Our proposal would ensure that the Virgin Money brand would play a significant role in the combined group, subject to reaching agreement with Virgin Group Holdings Limited.”

Read more: Virgin Money on track to deliver year-end targets