CYBG Group initially offered around £1.6bn for Virgin Money in May with 1.1297 new group shares in exchange for each Virgin Money share, but later upped its offer to 1.2125 new shares, which has been accepted.
It will leave Virgin Money shareholders owning approximately 38% of the combined group when the deal is completed.
The combined bank will have a little over 5% of the UK mortgage market, according to last year’s data from UK Finance.
It will have a £57.8bn portfolio of mortgages, representing 83% of total customer lending, with an average indexed loan-to-value of 57.2%, a net cost of risk of one basis point and a non-performing loan ratio of 0.6%.
A statement from the two institutions said it expects a significant majority of Virgin Money mortgages and cash ISAs to be migrated to CYBG platforms on renewal.
Overall an estimated 30% of all accounts of the combined group will be part of a transfer or migration process within its proposed integration plan.
The statement added that the IT migration will be phased over 36 months “to minimise execution risk with operational integration phased over a similar timeframe”.
Six million customers
CYBG CEO David Duffy said the move would create a national, full-service bank with the capabilities needed to compete effectively with the large incumbent banks.
“Together we will serve around six million customers, with the scale, capabilities and financial muscle to disrupt the status quo – and with a clear ambition to provide our customers with the best service in the UK,” he said.
“The strategic rationale is clear and offers both sets of shareholders real value, material earnings accretion, and enhanced capital generation for the benefit of all shareholders, together with both firms’ customers, colleagues and local communities.”
Virgin Money CEO Jayne-Anne Gadhia added that the offer reflected confidence in the bank’s strategy, track record of delivery and the complementary strengths of the two businesses.
“The combination of Virgin Money with CYBG will have greater scale to challenge the big banks. It will also accelerate the delivery of our strategic objectives, particularly the expansion of the products we offer to customers,” she said.
“The combined group will remain a committed voice behind the Women in Finance Charter as well as working to reduce the gender pay gap,” she added.