David Duffy, the Irish head of UK lender Virgin Money, stands to enjoy a multimillion-euro pay-day as a result of the group’s planned £2.9 billion (€3.4 billion) sale to Nationwide Building Society to create the second-largest mortgages and savings business in that market.
The former AIB chief executive quit the Irish bank in 2015 for Clydesdale and Yorkshire Bank Group (CYBG), then a subsidiary of National Australia Bank. He led the initial public offering of CYBG in early 2016 and a merger two years later with Virgin Money.
The Nationwide bid of £2.20 per share, including a 2p final dividend, values Mr Duffy’s 1.47 million shares in Virgin Money at £3.23 million. The share count is based on figures in the bank’s latest annual report to last September and subsequently disclosures on director transactions filed with the London Stock Exchange.
In addition, Mr Duffy had been granted awards of some 5.59 million shares that had not yet been vested. That is according to calculations based on figures in Virgin Money’s annual report and a subsequent award granted in December. It also takes into account the vesting of some awards in the same month.
The prospectus for CYBG’s IPO in 2016 stated that stock awards would vest in the event of a change of control of the company “to the extent the performance condition has been met up to the event in question”, subject to a degree of discretion by the remuneration committee.
If the entire 5.59 million shares vested, Mr Duffy would receive a further £12.3 million. The Nationwide bid was priced at a 38 per cent premium to Virgin Money’s “undisturbed price” as of Wednesday.
A spokesman for the Virgin declined to comment on the potential pay-day or Mr Duffy’s plans following the completion of the merger. Efforts to secure comment from Mr Duffy were unsuccessful.
It is understood, however, that the questions over Mr Duffy’s pay-day and future with group will only be hammered out if the bid, which is currently a preliminary agreement, results in a firm intention to make a bid by a deadline set for April 4th.
Mr Duffy’s remuneration last year amounted to £2.65 million.
The move by Nationwide marks the latest attempt at consolidation among mid-tier lenders that have struggled to break the grip of bigger banks. Over the past year, rising credit card arrears have hurt Virgin Money’s performance amid the cost of living crisis. A tie-up between the two lenders would create a group with total assets of about £366 billion.
Nationwide said on Thursday that the transaction would allow it to “accelerate its strategy and broaden and deepen its products and services faster than could be achieved organically”. The acquisition, it added, would give it “access to greater diversity of funding, notably from business deposits”.
The purchase would also mark a rare acquisition of a listed company by a mutual.
Benjamin Toms, an analyst at RBC Capital Markets, said the deal would “potentially lead to increased competition in the UK mortgage and savings market” and increase the building’s society share of the mortgage market from 12.2 per cent to 15.7 per cent.
Virgin Money would continue to operate as a separate business within Nationwide initially, although eventually it would be integrated and the brand retired over the next six years.
The building society added that it did not plan to “make any material changes to the size of the Virgin Money employee base in the near term”. Virgin Money employs about 7,300 people.
The Virgin Money board said it would be “minded” to recommend a firm offer if one was made. The Virgin group, which owns 14.5 per cent of Virgin Money shares, has also indicated that it would support a deal that would allow it “to benefit from Nationwide’s scale and pace of investment”.
Virgin Money company was formed after CYBG – the owner of Clydesdale and Yorkshire Banks – took over the smaller Virgin Money business in 2018 and adopted its brand.
The companies cautioned that there was no certainty that a firm offer would be made.
– Additional reporting, the Financial Times
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