The Board of CYBG Plc (ASX: CYB) announced to ASX shareholders today that it has made a revised proposal to Virgin Money Holdings UK (PLC) (LON: VM), the companies are now in discussions about an all-share combination to create a new national competitor in UK banking.
CYBG comprises Clydesdale and Yorkshire Bank in the UK, it was spun out of National Australia Bank Ltd (ASX: NAB). Virgin Money is one of the many brands named after Richard Branson’s Virgin, it acquired the in-danger Northern Rock bank after the GFC.
Under the new proposal, CYBG would acquire all the shares of Virgin Money, then Virgin Money shareholders would receive 1.2125 new CYBG shares for each Virgin Money share. It would result in Virgin shareholders owning 38% of the combined business.
CYBG believes the proposal would offer a good alternative to the current large incumbent banks, which would have six million personal and business customers. The benefits would include removing duplications, optimising IT spend, ‘rationalising’ CYBG & Virgin Money operations and increasing economies of scale in central procurement and third-party outsourcing.
Usually, the above ideas are ‘management speak’ for job reductions.
Since the start of May 2018, the CYBG share price has dropped around 10% to $5 and the Virgin Money share price has risen by 15% to £343, according to Google Finance.
The CYBG share price has partly been going backwards due to the rising legacy PPI costs.
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