Nationwide’s £2.9bn swoop on Virgin Money gets go-ahead from CMA

A tie-up between Nationwide and Virgin Money has got the greenlight from the competition watchdog today, paving the way for the UK’s biggest banking deal to close in the final quarter of this year.

The Competition and Markets Authority, which opened a probe into the deal last month, said in a statement this morning the combination of the two firms was a “relevant merger situation” that would “not give rise to a realistic prospect of a substantial lessening of competition”.

The decision will now clear the way for the £2.9bn merger to create the country’s second biggest mortgage lender after Lloyds Banking Group, in one of the biggest shake-ups in the UK retail banking market since 2008.

“We welcome the CMA’s decision to unconditionally clear the proposed acquisition by Nationwide following its Phase 1 investigation,” a Virgin Money spokesperson said. “The enlarged group will combine two complementary businesses that together can offer more great products and services to a larger customer base.” We continue to expect that the transaction will complete in the fourth quarter of this year.”

After being first announced in March, the deal has unsettled sections of Nationwide’s member base, who say they are being shut out of decision making on the deal. In its decision today, the CMA said it had “received concerns from individuals who were of the view that Nationwide’s members should have had the opportunity to vote on the acquisition of Virgin Money”.

However, the concerns did not fall within the scope of its investigation.

Investors in the Virgin Money voted just over 89 per cent in favour of the acquisition in May, easing past the 75 per cent threshold required. 

The transaction, which is expected to complete in the fourth quarter of this year, stands to create a combined group with some 700 branches and assets of roughly £366.3bn.

The deal will also mark Nationwide’s entry into the riskier business banking market as it looks to scale and diversify away from interest rate-sensitive savings and mortgages.

Virgin Money is set to keep operating as a separate legal entity within the Nationwide group in the medium term, with a separate board and banking licence. However, the two lenders agreed that after four years, the business would have two years to rebrand from the Virgin name.