Virgin Money bought by CYBG for £1.7bn

The owner of Clydesdale and Yorkshire banks is to take over Virgin Money in a £1.7bn deal, creating the UK's sixth-largest bank with 6 million customers.

A man checks his phone as he walks past a branch of Virgin Money in Manchester, Britain September 21, 2017.

CYBG's David Duffy will stay on as chief executive, leaving Virgin Money boss Jayne-Anne Gadhia to serve in a consultancy role as his senior adviser.

It plans to retain the Virgin Money brand and will pay Richard Branson's Virgin Enterprises royalties of £15m per year as part of a licensing agreement, as well as allowing the conglomerate to nominate a non-executive director to the combined company's board.

CYBG is offering Virgin Money's investors 1.2125 of its shares for each of their shares, meaning they would control 38pc of the combined company should the deal go ahead.

CYBG said the takeover would "bring together the complementary strengths of two successful challenger banks to create the UK's first true national competitor to the large incumbent banks".

The take over still has to be approved by CYBG and Virgin Money shareholders, but John Cronin, analyst at stockbroker Goodbody, said both sets were likely to agree to the terms.

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CYBG shares were trading higher at around 0.6% in early trading, while Virgin Money shares were up as much as 2.4%.

The purchase of the Richard Branson-backed bank gives consumer and business lender CYBG greater scale, potential cost savings and access to the firm's presence on the high street. Through Friday's close, the stock had gained about 14% since CYBG, formerly the British division of National Australia Bank Ltd., initially made an offer in May.

"As a result of the significant operational overlap between CYBG and Virgin Money, the combined group will be able to reduce the duplication of roles, leading to a decrease in the total number of FTEs (full-time equivalent employees)".

It said some of those job losses would be achieved "via natural attrition".

Virgin Group CEO Josh Bayliss said CYBG is the partner Virgin Money needs to continue to grow.

CYBG, whose will pay a fixed royalty to keep the Virgin Money brand, which starts at 12 million pounds in the first year and increases to 15 million pounds in the fourth year.

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