Virgin Money to be bought for $2.3 billion

Australian shareholder-controlled Clydesdale Bank will join forces with Richard Branson's Virgin Money, creating a bank that hopes to use the billionaire's "entrepreneurial" brand to take on the United Kingdom's largest lenders.

The merged company will be around twice the size of its largest rival among Britain's smaller banks and be able to draw on the firepower of the Virgin brand, which the combined group will pay a royalty to keep.

CYBG CEO David Duffy will lead the combined group with Virgin Money CEO Jayne-Anne Ghadia acting as a senior advisor for an unspecified period of time.

CYBG is offering Virgin Money's investors 1.2125 of its shares for each of their shares, meaning they would control 38pc of the combined company should the deal go ahead.

The group now has around 9,500 full-time employees and expects to reduce this by around a sixth, equating to around 1,500 people.

It said some of those job losses would be achieved "via natural attrition".

It said the deal will create Britain's sixth-largest bank and will be a new challenger to the country's top four lenders.

Virgin Money, which was founded in 1995, expanded its business in 2011 when it bought the remnants of Northern Rock for about £747m.

With this deal, the focus shifts to a more traditional form of competition - growing a business to a sufficient size to take on the incumbents at their own game.

CYBG Chairman Jim Pettigrew, Chief Executive Officer David Duffy and CFO Ian Smith will retain their current positions in the new group, according to the statement.

He added that "technology and agility" were the factors that would decide the future of banking.

Gadhia said: 'This is a compelling deal for our shareholders, that accelerates value delivery and represents the beginning of the next chapter of the Virgin Money story'.