Sir Richard Branson is on track to secure over £650 million from the potential sale of his challenger bank, Virgin Money, to Nationwide, based on current estimates. Last week, the announcement that Nationwide had agreed to a £2.9 billion takeover of Virgin Money was made, with the ambition of creating the second-largest mortgage and savings provider in the UK. This deal values Virgin Money shares at 220p each for the shareholders.
Branson’s windfall includes an “exit fee” of at least £250 million from Nationwide, on top of the £400 million worth of his 14.5% shareholding in Virgin Money, as outlined in the preliminary deal. Additionally, as part of the deal discussions, Branson, who first launched the Virgin brand in 1972, has negotiated a “brand license agreement” with Nationwide. This agreement stipulates that Nationwide will discontinue the use of the Virgin Money name after four years. The Virgin brand, central to Branson’s global business empire, is managed by Virgin Enterprises and has been utilized across a diverse range of sectors including broadband, airlines, entertainment, and leisure.
It is anticipated that Branson will earn around £60 million yearly in licensing fees while Nationwide operates under the Virgin brand, plus a concluding payment of at least £250 million when the agreement ends. These projections are based on the precedent set when CYBG, the parent company of Clydesdale and Yorkshire Bank, acquired Virgin Money in 2018 and adopted its branding. Nevertheless, these figures are conjectural as the proposed acquisition by Nationwide has yet to be confirmed. Nationwide has been given a deadline until April 4th to declare its definitive intention to pursue the acquisition of Virgin Money.
The likelihood of another entity bidding for Virgin Money seems low, especially as its share price neared Nationwide’s offer of 220p last Thursday.
