Nationwide agrees acquisition of Virgin Money

Nationwide Building Society has agreed terms of a possible acquisition of Virgin Money UK plc.

Under the preliminary agreement Nationwide will pay 220p in cash per Virgin Money share, representing a premium of 38% to Virgin Money’s share price on Wednesday.

The £2.9bn deal would see the Virgin Money brand retained for around six years.

Nationwide is UK’s biggest building society with more than 17 million customers, while Virgin Money is the UK’s sixth largest retail bank with around 6.6 million customers.

The combination of the two businesses would create the second biggest provider of mortgages and savings in the UK.

Virgin Money is a FTSE 250 company, dual-listed on the London Stock Exchange (LON:VMUK) and the Australian Securities Exchange (ASX:VUK).

Following the acquisition Nationwide will remain a building society, owned by its mutual members.

Nationwide has the largest single-brand branch network in the UK. It said it intends to retain a branch everywhere where the combined group is present, until at least the start of 2026.

Last month, Barclays agreed a deal to acquire Tesco’s retail banking business for £600m and further consolidation in the sector is possible as lenders look to retain market share.

“With the outlook for the UK economy stabilising, we wouldn’t be surprised to see more deals like this announced,” RBC Capital Markets analyst Benjamin Toms told Reuters.

“UK bank valuations are relatively cheap for the sustainable returns they offer.”