CYBG PLC (LON:CYBG) has raised its £1.6bn offer to buy rival challenger bank Virgin Money PLC (LON:VM.) and said the two companies are in discussions regarding an all-share combination.
In a statement, CYBG said it would acquire the entire issued ordinary share capital of Virgin Money on the basis of an exchange ratio of 1.2125 new CYBG shares for each Virgin Money share, around a 7% increase on its original proposal.
READ: Virgin Money shares jump as it mulls proposed £1.6bn takeover bid from CYBG
Virgin Money shareholders would own about 38% of the combined group as compared to 36.5% under the original offer.
They would also be entitled to retain any dividend declared and paid in respect of the period ending 30 June 2018.
CYBG, the owner of Clydesdale Bank and Yorkshire Bank, said the proposed combination would provide a full-service banking offer for around six million personal and business customers.
It added that the two firm’s boards recognise that the proposed combination “would offer the potential for significant synergies.”
The group said discussions are ongoing regarding other terms and conditions of the proposed combination and reciprocal due diligence is being conducted.
Virgin brand licence talks too
It added that separate discussions and due diligence are also ongoing between CYBG and Richard Branson’s Virgin Enterprises Limited in respect of the license of the Virgin Money Brand to the combined group.
Since the original offer, Virgin Money, which was founded and is partly owned by entrepreneur Branson, has been tight-lipped about the bid, saying only that it was reviewing the proposal.
As a result of the revised proposal, the Takeover Panel’s Put Up or Shut Up (PUSU) deadline for any offer, which was due to expire today. has been extended until 5pm on June 18.
In late afternoon trading, Virgin Money shares were 0.6% higher at 344.9p, while CYBG shares gained 2% at 297.6p, having shed 6% over the past month.
Russ Mould, investment director at AJ Bell commented: “As this is an all-share transaction, the decline in CYBG’s share price since it was first announced in May means this new offer is actually worth less to Virgin shareholders than the original approach, although they would own slightly more of the combined entity under the new terms."
He added: “Management of both firms seem to be on board with the deal, but the lack of any cash element may become more of a talking point as we approach the 18 June deadline for a formal offer to be agreed.”
-- Adds share prices, analyst comment --