Sir Richard Branson is poised to garner over £650 million from a possible acquisition of his challenger bank, Virgin Money, by Nationwide, according to estimates. Last week, the two lenders revealed that Nationwide had reached terms for a £2.9 billion acquisition of Virgin Money, aiming to establish the UK’s second-largest provider of mortgages and savings. Shareholders are slated to receive 220p per Virgin Money share.
Branson is set to receive an “exit fee” of at least £250 million from Nationwide, in addition to the £400 million valuation of his 14.5% stake in Virgin Money, as per the initial agreement. As part of the negotiations, the billionaire, who introduced the Virgin name in 1972, has established a “brand license agreement” with Nationwide. Under this arrangement, the building society would cease using the Virgin Money name after four years. The Virgin name is at the core of Branson’s business empire and is licensed through Virgin Enterprises. It has been employed across numerous brands, spanning broadband and airlines to entertainment and leisure.
According to sources, Branson is expected to receive approximately £60 million in fees annually while Nationwide utilizes the brand, with an additional payment of at least £250 million upon termination of the deal. These estimates were derived from a formula employed when CYBG, the parent company of Clydesdale and Yorkshire Bank, adopted the Virgin Money brand following its acquisition of the bank in 2018. However, these figures remain speculative as any potential takeover by Nationwide has not been finalized. Nationwide has until April 4th to announce a firm intention regarding whether or not to make an offer for Virgin Money.
The possibility of a competing bidder for the challenger bank appears slim, as its shares approached Nationwide’s 220p offer on Thursday.
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