On June 18, it was revealed that Clydesdale and Yorkshire Bank Group (CYBG) has purchased Virgin Money in a £1.7bn ($2.25bn) deal. As a result of the transaction, the joint entity will become the sixth-largest bank in the UK.
The deal is set to save Virgin Money and CYBG a total of £120m ($159m) each year by 2021.
CYBG has agreed to pay Virgin Money a minimum royalty of £12m ($16m) in the first year after the deal is completed, which will then rise to £15m ($20m) per year over four years. It will also pay an added annual royalty from the revenue produced in the fifth year. In addition, Virgin Money customers will be gradually transferred to CYBG over the next three years.
The deal will cause the loss of around 1,500 jobs at both Virgin Money and CYBG, as well as an expected but unconfirmed number of branch closures
According to the BBC, this deal will cause the loss of around 1,500 jobs at both Virgin Money and CYBG, as well as an expected but unconfirmed closure of a number of Virgin and CYBG’s 250 branches across the UK. CYBG hopes to achieve this by “natural attrition”.
Virgin Money shareholders will receive 1.2125 CYBG shares for every share they own. Virgin Group, being Virgin Money’s biggest shareholder with a 34.8 percent stake in the business, will receive a stake of 42.195 percent of CYBG.
CYBG is formed by the two banks: Clydesdale Bank, which was established in 1838 in Glasgow and is now one of Scotland’s largest banks, and Yorkshire Bank, which was established in 1859 in Halifax, West Yorkshire by Colonel Edward Akroyd.
Sir Richard Branson founded Virgin Money in March 1995; he now owns 35 percent of the company and stands to make a large profit from its sale.
This deal has brought together the UK’s two largest challenger banks to form “the first true national competitor” to the ‘big five’ banks, according to CYBG. Jayne-Anne Gadhia, CEO of Virgin Money, has described the transaction as a “compelling deal”.