The Virgin Money UK (ASX: VUK) share price is taking off on Friday.
In morning trade, the UK-based banking stock is up 34% to $4.12.
Why is the Virgin Money share price rocketing?
Investors have been scrambling to buy the bank's shares today after it received a takeover offer.
According to the release, the company has reached a preliminary agreement with Nationwide Building Society on a potential cash takeover.
Nationwide has tabled an offer of 220 British pence per share. This equates to A$4.26 per share based on current exchange rates and values the bank at approximately $5.7 billion.
The offer comprises a 218 British pence per share cash consideration and a 2 British pence per share dividend. The latter would be paid shortly before the completion of the potential takeover.
Eligible shareholders will also continue to receive the upcoming dividend of 2 British pence per share, which is scheduled to be paid on 20 March.
Takeover rationale
The boards of Virgin Money and Nationwide believe that the deal would combine two complementary businesses.
They highlight that it would create a combined group with total assets of approximately GBP366.3 billion pounds and total lending and advances of approximately GBP283.5 billion. This would make it the second-largest provider of mortgages and savings in the UK.
The Virgin Money UK board revealed that it carefully evaluated the offer with its financial advisers and concluded that it would be willing to recommend it if a firm offer is made on the same financial terms.
Virgin Money UK chair David Bennett commented:
The Board of Virgin Money is pleased that Nationwide recognises the considerable strengths and opportunities that exist across our business, with the potential acquisition delivering attractive value for our shareholders. We are confident that a combination would support an exciting new chapter for Virgin Money to benefit from Nationwide's scale and ambition.
This sentiment was echoed by the bank's CEO, David Duffy. He said:
This potential transaction with Nationwide represents an exciting opportunity to build on the significant progress we have made in becoming the only new Tier 1 bank in recent history. The combined scale and strength would expand our customer offering and complete our journey in the banking sector as a national competitor.
However, the bank has warned that there's no certainty that any firm offer will be made.
