Virgin Money has agreed to be taken over by Clydesdale and Yorkshire Banking Group (CYBG) in a £1.7 billion deal. CYBG said of the takeover, which was first proposed last month, that it would bring together their complementary strengths to create the UK’s first true national competitor to the large incumbent banks.

By reducing the overlap between their operations, the banks expect to make £120 million of annual savings by 2021.

The announcement warned that this is likely to result in job losses among their combined workforce of 9,500. It is believed that management roles would be hit worst by the staff reduction. The group’s combined 250 branches can also expect closures, however, the company failed to comment on how many would go.

CYBG is paying 1.2125 of it’s own shares in exchange for each Virgin Money share. Based on Friday’s closing price of 306p, this values each Virgin Money share at 371p.

CYBG to Adopt Virgin Money Brand

Both groups shares were trading higher after the announcement was made. The merger will see CYBG’s operations come under the Virgin Money brand in a licensing deal with Virgin Enterprises for £12m a year, rising to £15m later. The royalties from this will go to Sir Richard Branson, who founded Virgin Money in 1995.

All the group’s retail customers will be moved to Virgin Money over the next three years. Initially, CYBG will adopt the Virgin Money brand for personal banking, before trialing it with SME business customers. The rebrand will cost the group an estimated £60m.

Virgin Money’s Chief Executive, Jayne-Anne Gadhia, said: “The combination of Virgin Money with CYBG will have greater scale to challenge the big banks. It will also accelerate the delivery of our strategic objectives, particularly the expansion of the products we offer to customers.”

CYBG Chairman, Jim Pettigrew, said: “It is clear to us that the combined group can transform the UK banking landscape and offer real benefits to customers and communities throughout the UK. Since our IPO in 2016, the CYBG board and leadership team has established CYBG as a strong and sustainable business, with a track record of delivery and the credentials to deliver a transformational combination with Virgin Money.”