Yorkshire Bank owner improves offer for Virgin Money

CYBG, the owner of Yorkshire Bank and Clydesdale Bank, has improved its £1.6bn offer to buy Virgin Money.

Under the new terms, Virgin Money shareholders would own 38% of the new merged business instead of 36%. It has upped its offer by 7% in the exchange ratio for the entire share capital of Virgin Money compared to its initial bid on 7 May.

CYBG’s initial bid offered 1.1297 of its shares for each Virgin Money share, giving Virgin Money shareholders about 36% of the new merged business. However, the revised bid ups that to 1.2125 shares, giving Virgin Money shareholders about 38% of the combined group.

CYBG and Virgin Money said the move would create “the UK’s first true national banking competitor” as an alternative to the incumbent banks, as well as provide efficiencies.

A new deadline of 18 June has been outlined for the terms of the merger to be ironed out.

Updating the markets this morning, CYBG said: “The Proposed Combination would provide a powerful full-service banking offer for around six million personal and business customers, bringing together the complementary strengths of CYBG and Virgin Money.”

The banks said they are seeking to remove duplication across the combined group, optimise IT spend, rationalise CYBG’s and Virgin Money’s operations and increasing efficiencies in central procurement and third party outsourcing costs.

If the merger goes ahead, it would be the UK’s fifth largest bank. CYBG has said it will keep the Virgin Money brand, subject to an agreement with Richard Branson’s Virgin Group.

Virgin Money, which was founded in 1995, expanded its business in 2011 when it bought the remnants of Northern Rock for about £747m.

Sir Richard Branson’s Virgin Group is Virgin Money’s biggest shareholder with a 34.8% stake in the business.