- Allan Gray: Giving vote to Nationwide members ‘a much better way forward’
- Building society under fire for refusing to give 16m members a say in takeover
- Virgin Money shareholders can vote on the deal as it is a listed company.
Big deal: National boss Debbie Crosbie insists she took expert advice
The biggest independent investor in Virgin Money has launched an extraordinary attack on its board for accepting an offer from Nationwide that is “likely to sell shareholders very short”.
In a harsh salvo, fund management firm Allan Gray – which owns more than 10 per cent of the lender – also said giving Nationwide members a vote on the £2.9bn purchase would have been “a way out.” better”.
The building society has been criticized for refusing to give its 16 million members a say in the takeover. Virgin Money shareholders can vote on the deal, as it is a listed company, and 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 Nationwide’s bid, meaning disillusioned investors such as Australian group Allan Gray could block it.
Sir Richard Branson’s Virgin Group has already pledged its 15 per cent stake in favor. 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 from 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 he will vote, but CEO and chief investment officer Simon Mawhinney expressed 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 offering compared to Virgin Money’s mortgages and other credit assets.
“This is not a sensible path to value creation,” he told the Mail on Sunday.
Nationwide’s surprise cash offer sent Virgin Money’s share price soaring, but left Mawhinney unimpressed. He said: “The sugar hit that came with the share price movement reeks of short-termism which, in the long term, will probably sell shareholders very badly.”
Mawhinney also sided with campaigners pushing Nationwide to conduct a survey of its members.
“Giving them a vote on this transaction would have been a much better path from a governance perspective,” he said.
“But other than that, I suspect their disappointment pales in comparison to ours,” he added.
Campaigners who have gathered more than 5,000 online signatures from Nationwide members calling for a survey have accused the mutual of using “technicalities” to reject their demands.
Nationwide, run by former Virgin Money executive Debbie Crosbie, says it needed expert advice before deciding there was no need to consult members over a deal, the biggest in British banking since the financial crisis.
Insiders at the UK’s largest building society also say a benefit of the deal is that Virgin’s future profits will remain in the UK, rather than going to Australian shareholders in the form of dividends.
Australian banks are better valued than British banks 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 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 offer was launched. “It will compensate shareholders for the fundamental value of Virgin Money,” in cash, the bank spokesman added.
