Mixed opinion on whether it is offering enough
Thursday 17 May 2018 Author: David Stevenson

The chief financial officer of CYBG (CYBG) has refused to comment on the bank’s takeover approach for Virgin Money (VM.), revealed on 7 May.

Speaking to Shares at its half year results on 15 May, Ian Smith wouldn’t be drawn into discussion on any element of the approach.

Virgin has yet to formally respond to takeover interest but some analysts reckon CYBG will have to pay significantly more than the current proposal of 1.1297 new CYBG shares for each Virgin Money share. That works out as a 15% bid premium to the closing price before the announcement.

Investment bank Berenberg believes the proposed terms are attractive, saying Virgin needs to do a deal of some sorts because its growth opportunities are limited as a standalone business due to its costly deposit base.

Jefferies, another investment bank, says the current proposal implies a 1.2-times takeout multiple on a price to tangible book value metric. This is much less than the 2.3-times book value rating enjoyed by Shawbrook and 1.8-times for Aldermore when they were acquired.

CYBG has until 5pm on 4 June to say if it intends to make a firm offer or not. The two companies are seen as a good fit as they have complementary products. CYBG previous tried to buy Royal Bank of Scotland (RBS) subsidiary Williams & Glyn. (DC/DS)

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