Nationwide to buy Virgin Money in £2.9bln deal
Preliminary arrangements have seen the Nationwide Building Society, a mutual, agree to takeover Virgin Money (VMUK).
The transaction would see the two brands continue to operate as individual entities and ‘initially’ allow VMUK to retain all of its 7,600 staff. As expected the share price of Virgin Money has risen near to the offer price of 220pence per share.
(AI Video Summary)
Nationwide Building Society
In a £2.9 billion deal, Nationwide Building Society has agreed to acquire Virgin Money, a move aimed at increasing its competitiveness in the UK retail banking industry. Despite the acquisition, both Nationwide and Virgin Money will continue to operate under their separate brands for the next five to six years. This means that all of Virgin Money's current 7,600 employees will still have their jobs.
Virgin Money's share price
To understand this better, let's look at a chart. On the chart, there is a blue dotted line representing the price target at 220 pence. This target price consists of the 218 pence deal price plus a 2p dividend. On the IG platform, Virgin Money's share price has risen to 217 pence. This reflects a 38% premium to its closing share price on Wednesday. This significant increase in share price is directly related to the impending acquisition by Nationwide.
UK retail banking sector
So, why is Nationwide acquiring Virgin Money? This acquisition is a strategic move by Nationwide to strengthen its position in the UK retail banking sector. By joining forces, Nationwide hopes to compete better against other major players in the industry. The agreement allows both brands to remain separate, preserving their existing employees and customers.
Looking at the chart again, you can see that Virgin Money's share price has soared to 217 pence following news of the deal. This is almost a 37% increase. The blue dotted line on the chart represents the target price of 220 pence, which includes the deal price and the dividend. It was expected that the share price would rise given the upcoming acquisition by Nationwide.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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