Nationwide Building Society has had an all-cash bid for Virgin Money accepted by its rival lender in a move that will make it the UK's second-largest mortgage provider.
In a shock move by Britain’s largest mutual, Nationwide will pay 220p per share comprising 218p per share cash plus a 2p dividend in a deal that values Virgin at £2.9 billion.
Virgin Money added it had also suspended plans for a £150 million buyback after the offer, which is pitched at a 37% premium to last night’s share price.
In a statement, the lenders said the potential acquisition would create a combined group with total assets of approximately £366.3 billion and total lending and advances of approximately £283.5 billion.
As a result, it would become second in mortgages and savings in the UK, according to the joint statement.
Chairman of Nationwide Building Society Kevin Parry commented: “The combination would increase Nationwide's scale and financial strength, put us in a stronger position to continue to provide Fairer Share Payments to eligible Nationwide members, and offer rates for mortgages and savings that are, on average, better than the market average."
Nationwide said adding Virgin Money's £9 billion of existing business lending balances and 'Business Current Account' would enable Nationwide to build on its existing business savings proposition,
Chief executive of Virgin Money UK David Duffy added: "This potential transaction with Nationwide represents an exciting opportunity to build on the significant progress we have made in becoming the only new Tier 1 bank in recent history.
“The combined scale and strength would expand our customer offering and complete our journey in the banking sector as a national competitor."