Virgin Money investor ‘disillusioned’ by Nationwide takeover

Big deal: Nationwide chief Debbie Crosbie insists she took expert advice

The biggest independent investor in Virgin Money has launched an extraordinary attack on its board for accepting a bid from Nationwide that is ‘likely to sell shareholders very short’.

In an excoriating broadside, fund management firm Allan Gray – which owns more than 10 per cent of the lender – also said giving Nationwide’s members a vote on the £2.9 billion buyout would have been ‘a much better path’.

The building society has come under fire for refusing to give its 16 million members a say on the takeover. Virgin Money shareholders do get a vote on the deal as it is a listed company, and they have until this week to cast their vote.

The result will be announced at a meeting on May 22.

Virgin Money needs three-quarters of voting shareholders to approve the Nationwide offer, meaning disillusioned investors like Australian group Allan Gray could block it.

Sir Richard Branson’s Virgin Group has already pledged its 15 per cent stake in favour. But Australian investors led by Allan Gray could hold the key to the outcome. They own just under half of the bank’s shares – a legacy of when the former Clydesdale and Yorkshire Bank Group was owned by National Australia Bank before it was bought by Virgin Money.

Allan Gray has not said which way it will vote but managing director and chief investment officer Simon Mawhinney spelt out his frustration.

He said he was ‘disappointed’ that the bank’s board had agreed to sell ‘for 65p in the pound’ – the value of Nationwide’s bid compared to Virgin Money’s mortgages and other loan assets.

‘This is not a sensible path to value creation,’ he told the Mail on Sunday.

Nationwide’s surprise cash bid caused Virgin Money’s share price to spike but left Mawhinney unimpressed. He said: ‘The sugar hit that came with the share price move reeks of short-termism which, in the long term, is likely to sell shareholders very short.’

Mawhinney also sided with campaigners pushing Nationwide for a member poll.

‘Giving them a vote on this transaction would have been a much better path forward from a governance perspective,’ he said.

‘But that aside, I suspect their disappointment pales in comparison to ours,’ he added.

Campaigners who have mustered more than 5,000 online signatures from Nationwide members requesting a poll have accused the mutual of using ‘technicalities’ to reject their demands.

Nationwide, led by former Virgin Money executive Debbie Crosbie, says it took expert advice before deciding members did not need to be consulted on a deal – the biggest in British banking since the financial crisis.

Insiders at the UK’s biggest building society also say a benefit of the deal is that Virgin’s future profits will stay in the UK, rather than going to Australian shareholders as dividends.

Australian banks are more highly valued than British ones and the price Nationwide is paying for Virgin Money is similar to that paid by Barclays for Tesco Bank earlier this year, they added.

Virgin’s shares are trading just below Nationwide’s 220p offer price, suggesting another bidder is unlikely to enter the fray. 

A Virgin Bank spokesman said Nationwide’s offer was 38 per cent above the bank’s share price before the bid was launched. It ‘will compensate shareholders for the fundamental value of Virgin Money ‘, in cash, the bank’s spokesman added.