Virgin Money’s largest investor slams board for £2.9bn Nationwide deal

Virgin Money is set for a £2.9bn tie-up with Nationwide

Virgin Money’s largest independent investor has slammed the bank’s board for accepting a £2.9bn bid from Nationwide, saying it is “likely to sell shareholders very short”.

Allan Gray, a leading Australian fund management firm, launched an excoriating attack focusing on what it perceives to be the low valuation at which Virgin Money is set to change hands.

Its chief investment officer Simon Mawhinney, told the Mail on Sunday that he was “disappointed” that the bank’s board had agreed to accept the offer from Nationwide for just “65p in the pound”, referring to the value of the bid relative to Virgin Money’s mortgages and other loan assets.

“This is not a sensible path to value creation,” he added.

The board of Virgin Money accepted Nationwide’s £2.9bn takeover offer in March, in a move that would make the mutual the second largest lender in the country.

The bid was valued at 220p per share, a 38 per cent premium on its listed price before the move became public.

But despite the considerable premium – and the fact that the bid prompted a rally in Virgin Money’s share price – Mawhinney felt shareholders were still being shortchanged.

“The sugar hit that came with the share price move reeks of short term-ism which, in the long-term, is likely to shell shareholders very short,” he said.

Mawhinney’s comments come amid mounting criticism of the deal from both analysts and shareholders. Shore Capital analyst Gary Greenwood and boutique investment bank KBW have both said publicly that the deal represents poor value for Virgin Money’s shareholders.

The interventions come ahead of a crunch vote on the deal by Virgin Money’s shareholders, which requires at least 75 per cent approval. The result will be revealed at a shareholder meeting on 22 May.

The investor also used the interview to criticise the fact that Nationwide’s 16m members – who, due to the lender’s status as a mutual, comprise anyone with a mortgage or loan with it – have not been given a vote on the deal.

“Giving them a vote on this transaction would have been a much better path forward from a governance perspective,” Mawhinney said. “But that aside, I suspect their disappointment pales into comparison to ours.”

A petition demanding that Nationwide members get a say on the deal has already attracted 5,000 members’ signatures,

But City A.M. understands that the the building society was in actual fact seeing little opposition from members internally, and that such a vote would hold up the deal.

A spokesman for Virgin Money said: “The offer from Nationwide represents a c38 per cent premium to Virgin Money’s closing share price on 6 March… The offer will compensate shareholders for the fundamental value of the Virgin Money Group… in cash.”


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