Virgin Money: Takeover; Value Finally Recognized as Nationwide Comes Knocking

Virgin Money, the sixth-largest bank in the UK, appears likely to be acquired by Nationwide Building Society, with the parties reaching a preliminary agreement. The GBX 220 consideration appears fair in our view. It is a 5% premium to our stand-alone fair value estimate for no-moat Virgin Money, and a considerable 38% premium to the share price prior to the announcement, which has languished for years. The consideration comprises a GBX 218 cash payment plus a GBX 2 dividend.