Monday 10 September 2018 3:07 pm

CYBG’s £1.7bn takeover of Virgin Money approved by shareholders

Shareholders have backed banking group CYBG's £1.7bn takeover of Virgin Money.

CYBG, which owns Yorkshire Bank and Clydesdale Bank, and Virgin Money held general shareholder meetings this morning where three motions related to the deal were passed with an overwhelming majority.

All three resolutions were passed by over 96 per cent of CYBG shareholder votes while over 99 per cent of Virgin Money investors approved the merger.

Gary Greenwood, analyst at investment group Shore Capital, said: "The takeover solves the problem that both banks had where they were struggling for earnings growth.

"This takes out the need for Virgin to build up the digital bank, and should help drive earnings growth. There will be a degree of investment directed from Virgin to spend on the CYBG platform."

Virgin Money hired former Barclays boss Antony Jenkin's fintech start up 10X Banking to create a digital platform for the challenger bank, however the development will be unnecessary as CYBG has its own service, called "B".

Addressing rumours that CYBG may attempt further acquisitions Greenwood said: "This is a big acquisition for both banks, with a lot of work to do.

"It would be poor management to try and make other acquisitions straight away while they are trying to integrate this business.

"They need to demonstrate integration to the market before they make any other moves."

In the long-term TSB, Santander or Co-op banks could be potential targets for CYBG, Greenwood suggested.

Investec analyst Ian Gordon added: "It seemed to be a done deal so the actual votes did not surprise.

"I think the combination makes good sense in terms of cost take-out and in terms of deploying the Virgin brand to the SME growth plan, as the CYBG business bank is less well known outside its geographical heartland of Yorkshire and Scotland."

"I remain positive on the logic of the combination," Gordon said, "through the eyes of a CYBG shareholder it is an absolute steal."

Some shareholders voted against a £619,000 redundancy payout and £1.1m termination payment for Virgin Money chief executive Jayne-Anne Gadhia, however the motion was passed.

The takeover will see Virgin Money's shareholders hold 38 per cent of the group, and is expected to be completed before the end of the year.

Chief executive of Virgin Money Jayne-Anne Gadhia said: "I am delighted with the support from our shareholder base in approving the recommended all-share offer for Virgin Money by CYBG.

"Bringing together the complementary strengths of Virgin Money and CYBG will create the UK's first true national competitor in UK banking, improving competition and choice for all UK consumers, while enabling the Virgin Money franchise to continue to flourish."

Gadhia will act as a consultant to the board for up to 18 months and Clydesdale Bank's chief executive David Duffy will lead the group.