Virgin Money has takeover approach from Yorkshire Bank owner

Virgin Money has received a takeover approach from the owner of Yorkshire Bank and Clydesdale Bank, which would value the challenger bank at £1.6bn.

The Newcastle-based lender, backed by billionaire Richard Branson, said CYBG has suggested handing investors 1.13 of its shares for each Virgin Money share they own to give them a 36.5% of the combined group, The Telegraph reported.

The potential takeover has emerged after Virgin Money defied its doubters who feared the challenger bank’s margins would come under pressure due to cut-throat competition in the mortgage market.

Instead Virgin Money’s share price bounded over 6% higher last week after it revealed resilient margins and better than expected growth in deposits of 7.4% to £31.1bn.

CYBG’s preliminary approach offers Virgin Money shareholders a 15% premium compared to its close on Friday, and a stake in the creation of “the UK’s leading challenger bank”.

CYBG said it believes that the combined group could offer both personal and SME customers a “genuine alternative to the large incumbent banks”.

“The combination would provide a powerful, full-service banking offer, including leading digital and mobile banking services for six million personal and business customers, bringing together the complementary strengths of CYBG and Virgin Money,” it said.

Virgin Money said: “There can be no certainty either that an offer will be made nor as to the terms of any offer, if made. Accordingly, shareholders are advised to take no action in relation to this proposal.”

Under city rules, CYGB has until June 4 to make a firm offer for Virgin Money.