Yahoo Finance Virgin Money's £1.7bn takeover by CYBG to result in 1,500 job losses
Clydesdale and Yorkshire Banking Group will scrap 1,500 jobs and rebrand its branches as Virgin Money after striking a £1.7bn all-share deal to acquire its smaller rival.
Debbie Crosbie, CYBG’s chief operating officer, said the job cuts would mostly fall on senior management and centralised back office roles but that “a minimal” number of branches could be closed in areas where the two companies operate in close proximity.
CYBG has offered Virgin Money’s investors 1.2125 of its shares for each of their shares, meaning they would control 38pc of the combined company should the deal go ahead.
Ms Crosbie said Virgin Money’s large number of mortgage and credit card customers would complement CYBG’s strength in current accounts and small business banking, allowing the combined business to become a “proper national competitor” to the big four banks.
She said it was too early to say the precise number of branches that could be shuttered because of the merger but said: “One of the real attractions of this deal is the branch network that Virgin has, combined with what Clydesdale Bank and Yorkshire Bank currently have, gives us national coverage and national reach.”
The job cuts would leave the combined company with around 8,000 employees, along with 6m customers and £83bn worth of assets. It will rebrand its entire retail business to Virgin Money over the course of three years as well as trialling the brand for its commercial customers.
In return it will pay £15m of royalties to Richard Branson’s Virgin Enterprises per year, as part of a licensing agreement that will also allow the conglomerate to nominate a non-executive director to the merged company’s board.
CYBG chief executive David Duffy, its chairman Jim Pettigrew and its chief financial officer Ian Smith will continue to lead the combined business, while Virgin Money boss Jayne-Anne Gadhia has agreed to become a senior adviser to Mr Duffy “for a period of time beyond completion of the offer, on terms to be agreed”.
The Daily Telegraph understands Ms Crosbie is likely to stay on in a similar role to her current one.
The offer values Virgin Money at 371p per share, a 19pc premium on their closing price on the day before talks between the parties were first announced last month and a 35pc premium on their average price in the three months to May 4.
Michael Hewson, an analyst at CMC Markets, said CYBG would need to be careful when moving Virgin Money’s customers over to its IT systems in light of TSB’s bungled migration to its owner Sabadell’s platform last year, which left thousands of customers unable to access their accounts for days.
But Mr Duffy told the BBC’s Today programme that he was “extremely confident” it would go off without a hitch because there would be “no big IT migration” and Virgin Money’s 100,000 current accounts would be moved across “over time”.
Talk of a merger was first confirmed in early May, when Virgin Money revealed it had received an offer from CYBG worth £1.6bn. That was sweetened to £1.7bn earlier this month.
As well as the big established banks, the new business will need to fend off competition from digital-only rivals such as Monzo and Revolut, which have been growing rapidly in recent years.
But Ms Crosbie said they were unlikely to pose a threat to CYBG, adding: “I think some of those guys do some really interesting things but their market shares are tiny and their product offerings are very limited.”
Shares in Virgin Money were down 2.4pc at 346p in afternoon trade, while CYBG's were down 1.4pc at 302p.
