Clydesdale Bank Yorkshire Bank (CBYG) has made a preliminary approach for Virgin Money, which values the challenger bank at £1.6 billion.

Under the terms of the proposal, CYBG would acquire all the issued and to be issued ordinary share capital of Virgin Money on the basis of an exchange ratio of 1.1297 new CYBG shares for each Virgin Money share. Virgin Money shareholders would own approximately 36.5 per cent of the combined group.

A statement read that CYBG recognises the strength and appeal of the Virgin Money brand, adding that “our proposal would ensure that the Virgin Money brand would play a significant role in the combined group, subject to reaching agreement with Virgin Group.”

It continued that the combination would create the UK’s leading challenger bank, offering both personal and SME customers a genuine alternative to the large incumbent banks.

“With this further strengthened customer franchise and national reach, CYBG believes the combination would deliver increased value for shareholders and wider benefits to other stakeholders,” stated CBYG.

However, the board will only proceed with a transaction if it is in line with CYBG’s strategic objectives and the best interests of CYBG shareholders.
A firm intention to make an offer for Virgin Money is due by 4 June, in accordance with the UK Takeover Panel code.

Virgin Money confirmed that a preliminary and conditional proposal was made on 7 May and added that its board is in the process of reviewing this proposal.

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