Decision time: Nationwide boss Debbie Crosbie
Nationwide’s bid for Virgin Money could be diverted off course if members of the building society demand a say in the £2.9bn deal.
Calls to give the mutual’s owners a vote in the takeover have grown since plans were revealed to acquire the challenger bank and create Britain’s second-largest savings and loan group.
Buying Virgin, which is about a third its size and includes Yorkshire and Clydesdale banks, would propel Nationwide into the big league of retail banking.
The combined group would have almost 700 branches and £366bn in assets. Nationwide, run by Debbie Crosbie, has until April 4 to make a firm offer.
But society also has to navigate between the contradictory codes of a democratic mutual owned by its members, on the one hand, and the city rules governing the acquisition of a publicly traded company like Virgin Money, on the other.
It has been revealed that only 500 Nationwide members depositing £50 each would be able to call a special meeting to push for a vote on the Virgin deal, according to the company’s own constitution which governs its operation.
But experts insist a member vote would be an “arbitrary test” and would cause delays that would make it impossible for Nationwide to make a binding offer by April 4 under Takeover Panel rules governing bid schedules. Organizing a member vote would take Nationwide well beyond that time.
The society says it has required “extensive” legal advice that a members’ vote under the Building Societies Act 1985 is not needed to approve the Virgin acquisition.
A survey would “tie the board’s hands” and restrict its ability to buy a publicly traded bank, they add. Experts say Nationwide would also back down if a third party entered the fray with a rival bid for Virgin.
The mutual company would not want to be dragged into a public bidding war for a publicly traded bank, they add.
Santander has been mooted as a potential buyer for Virgin, but the Spanish-owned bank is not believed to be preparing a bid, sources say.
Virgin Money shares have continued to trade below Nationwide’s 220p offer price, suggesting another bidder is unlikely to emerge. Nationwide rules say that 500 “qualified” members who have been in the society for at least two years can call a membership meeting, which must be held within 63 days of receiving the request. The hurdle is relatively low, especially in the age of social media crowdfunding.
Nationwide has written to its 16 million members outlining the deal, which takes it into business banking for the first time, but has been unable to say how they will benefit because it has not yet made a formal bid for Virgin.
Some members think the deal looks good on paper, but they want a say in the outcome in principle because they own the mutual.
Others are concerned that while Virgin Money shareholders can vote on the deal, Nationwide members cannot. Virgin Money founder Sir Richard Branson says he is “willing” to accept.
Nationwide’s bid was backed by two mutual advocates. “There are many sectors of financial services that would benefit from the mutual model, including business banking,” said Robin Fieth, chief executive of the Association of Building Societies. And Peter Hunt, of the lobby group Mutual, said: “It would also return much of Northern Rock’s former mortgage book to the mutual sector.”
