Clydesdale’s takeover of Virgin Money is all but set after both board’s unanimously supported the deal for a new 1.2125 CYB shares for each Virgin Money share. It’s unusual for a takeover to be a win for both companies but this one seems to be. From the Virgin side, the +20% rally in the stock price obviously helps the all scrip deal while CYB will benefit from the Virgin brand and distribution channels. The combined entity will now have a much larger revenue and funding base and will become the 5th or 6th largest UK Bank.
Market Matters Take/Outlook
This deal makes sense because the company with the inferior performance (CYB) was trading at a higher share price multiple while the company with the superior performance but lower share price multiple was the target (Virgin Money). The former is substantially owned by Australians and the latter is not. CYB announced cost synergies of £120M, which represents one-third of the Virgin Money cost base. Such a planned reduction is common place amongst takeovers of financial companies.
CYBG (CYB) Chart
