Decision time: Nationwide boss Debbie Crosbie
Nationwide’s bid for Virgin Money could be blown off course if the building society’s members demand a say on the £2.9 billion deal.
Calls to give the mutual’s owners a vote in the takeover have grown since it revealed plans to snap up the challenger bank and create Britain’s second biggest savings and loans group.
Buying Virgin, which is about a third of 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 £366 billion of assets. Nationwide, which is led by Debbie Crosbie, has until April 4 to make a firm offer.
But the society also has to navigate between the conflicting codes of a democratic, member-owned mutual on the one hand and City rules which govern the takeover of a listed company like Virgin Money on the other.
It has emerged that just 500 Nationwide members depositing £50 each could call a special meeting to push for a vote on the Virgin deal, according to the society’s own constitution which governs how it is run.
But insiders insist a members’ vote would be an ‘arbitrary test’ and lead to delays that would make it impossible for Nationwide to make a binding offer by April 4 under Takeover Panel rules that govern bid timetables. Arranging a vote between members would take Nationwide far beyond that time.
The society says it has taken ‘extensive’ legal advice that no member vote is needed under the 1985 Building Societies Act to approve the Virgin takeover.
A poll would ‘tie the board’s hands’ and restrict its ability ever to buy a listed bank, they add. Experts say that Nationwide would also get cold feet if a third party entered to fray with a rival offer for Virgin.
The mutual would not want to get dragged into a public bidding war for a listed bank, they add.
Santander has been mooted as a possible buyer of Virgin, but the Spanish-owned bank is not thought to be lining up a bid, sources say.
Shares in Virgin Money have continued to trade below Nationwide’s 220p offer price, suggesting another bidder is unlikely to emerge. Nationwide’s rules say 500 ‘qualifying’ members who have been with the society for at least two years can call a members’ meeting, which must be held within 63 days of the request being received. The hurdle is relatively low, especially in 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 it 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 want a say in the outcome on principle because they own the mutual.
Others are concerned that while Virgin Money shareholders get to vote on the deal, Nationwide’s members do not. Virgin Money’s founder Sir Richard Branson says he’s ‘minded’ to accept.
Nationwide’s bid was backed by two champions of mutuality. ‘There are many parts of financial services which would benefit from the mutual model, not least business banking,’ said Robin Fieth, chief executive of the Building Societies Association. And Peter Hunt of lobby group Mutuo said: ‘It would also return much of the former Northern Rock mortgage book to the mutual sector.’
