Clydesdale and Yorkshire Bank have agreed a £1.7 billion deal to take over Virgin Money, with the aim of creating a brand with six million personal and business customers capable of taking on the UK's biggest lenders.
Under the terms of the deal, Virgin Money shareholders will get 1.2125 new CYBG shares for every Virgin Money share they hold, and will end up owning about 38% of the combined business.
Up to 1500 jobs are at risk as the combined business seeks £120 million of annual pre-tax cost synergies. Additional savings are expected to come from the mothballing of Virgin Money's online banking project, which last year accounted for £38.3 million in expenditure.
With the TSB debacle acting as a cautionary tale for bank IT mergers, CYBG is at pains to point out that the deal holds out the promise of a low-complexity integration.
States the bank: "Execution risk will be reduced by a detailed, phased migration and re-branding plan, to be delivered by a highly capable team drawn from two organisations with strong track records in large-scale transformation, and further mitigated by the relatively low complexity of the Virgin Money product offering, and in particular the small number of Virgin Money personal current accounts."
The new business will operate under the Virgin Money brand, through a £12 million licensing deal with Richard Branson's Virgin Group, rising to £15 million later.
David Duffy, CEO of CYBG, says: "By combining two of the UK's leading challenger banks, we will create a national, full-service bank with the capabilities needed to compete effectively with the large incumbent banks. We are bringing together CYBG's 175-year heritage in serving retail and SME customers and advanced digital technology, with the iconic Virgin Money brand and consumer champion credentials."