Nationwide has completed its £2.9bn takeover of Virgin Money.
The UK’s biggest banking merger since the financial crisis, the deal comes amid increasing consolidation among mid-sized lenders.
After lawyers received approval for the deal at a specialist companies court at the end of last week, Nationwide said on Tuesday that it now owned Virgin Money’s entire issued and to be issued share capital.
With the takeover completed, David Duffy has stepped down as Virgin Money’s chief executive and been replaced by former Nationwide CFO Chris Rhodes.
The tie-up between Britain’s biggest building society and sixth-largest bank shocked the City when it was agreed in March. It was cleared by the UK’s competition watchdog in July and approved by financial regulators in September.
Some 89 per cent of Virgin Money shareholders who voted at a meeting in May backed the deal, despite some analysts arguing that the bank’s management could have driven a harder bargain.
Nationwide’s purchase of a FTSE 250 bank is unprecedented among mutual lenders. The deal has created the UK’s second-biggest provider of mortgages and savings and the country’s largest branch network behind Lloyds.
It is set to mark Nationwide’s entry into the riskier business banking market, as it seeks to scale and diversify away from interest-rate-sensitive savings and mortgages.
“Nationwide is now a stronger mutual and able to deliver even greater value through our unique Branch Promise, leading customer satisfaction, and competitive savings and lending rates,” Nationwide CEO said on Tuesday.
“All Virgin Money profits will be retained for the benefit of customers and, for the first time in the UK, a full service business bank will be part of a large and modern mutual.”
Richard Branson, who founded Virgin Money in 1995, is set to net a near £650m payout based on his 14.5 per cent stake in the bank and licencing deals over the brand.
Nationwide’s takeover comes amid increasing consolidation within the UK’s mid-sized banking sector. Lenders flush with cash on the back of higher interest rates have pounced on smaller rivals struggling with cost pressures and a lack of scale.
Coventry Building Society expects to complete a £780m takeover of The Co-operative Bank in the first quarter of next year. Meanwhile, Barclays struck a deal to buy most of Tesco Bank in February, and Natwest acquired Sainsbury’s core banking arm in June.
Virgin Money is set to keep operating as a separate legal entity within the Nationwide group in the medium term, with a separate board and banking licence.
However, the two leaders agreed that the business would have two years to rebrand from the Virgin name after four years.